Budget Workshop: Market Value

Watching the February 16 presentation to CBRM council by staff of the Property Valuation Services Corporation (PVSC) I was struck by how often the presenters — Dave Penny, director of roll data and maintenance; Adam Hanna, assistant director of roll and data maintenance; and Lloyd MacLeod, director of assessment for the province — were forced to repeat the mantra that they are mandated to assess property at market value.

And market value, as defined in the Nova Scotia Assessment Act, is:

… the amount which in the opinion of the assessor would be paid if it were sold on a date prescribed by the Director in the open market by a willing seller to a willing buyer

That means they can’t assess value in terms of how much owners can afford to pay in taxes, all they can do is assess in terms of what the housing market — that ever rational force — thinks their house is worth at a given point in time.

This jumped out at me because I ran across the same argument recently to explain why the Nova Scotia Utility and Review Board (NSUARB) cannot take impacts on the environment or low-income customers into consideration when setting power rates — because it’s not mandated to.

This should be a hopeful state of affairs because these mandates aren’t decreed by the gods or carved in stone, they’re crafted by provincial governments who could, presumably, craft them to be more expansive and to consider factors other than market values (in the case of the PVSC) or corporate profits (in the case of the UARB).

But I’m not going to go full-on optimist about the situation just yet.


If you’ll permit me

I wrote a lot about property taxes back in 2017 and I think you might find that writing helpful because I have to say, I did.

I explained that PVSC uses a combination of two approaches — sales comparison and cost — to determine the market value of your property on that “base date,” namely, January 1 of the previous year.

The cost approach is  “based on the assumption that a potential owner would pay no more for a property than what it would cost for them to acquire the land and build themselves.” They “cost out construction” (asked how they do this by District 7 Councilor Steve Parsons, Penny said they use the Marshall & Swift Residential Cost Handbook) while the value of the land is calculated based on sales.

As for the housing sales comparison:

PVSC looks at all sales in your neighborhood six months before and after the base date. For their 2017 assessments, PVSC analyzed 1,096 residential property sales in the CBRM.

For your 2022 assessment, which was mailed out in January, the base date was 1 January 2021 and PVSC analyzed 3,902 sales, all of which would have taken place during what I’ve come to think of as “COVID times.” That roughly fourfold increase certainly jibes with everything I’ve heard about the effects of the pandemic on house sales.

But the PVSC also reviews building permits and I was interested to note that while in 2017, it looked at 822 permits, in 2022, it looked at 902, which isn’t a fourfold increase. I thought this seemed low, given all the anecdotal evidence about people renovating their homes during COVID, until I recalled two things.

First, not everyone applies for a permit. I remember former CBRM planning director Doug Foster bringing up that very issue during Municipal Charter discussions in 2018. Foster, who proposed that the CBRM bring property assessment in-house, rather than using PVSC, called building permits a “tax on honesty,” because people who apply for them pay extra tax while people who build without permits don’t.

Second — and probably more importantly — most interior work doesn’t require permits. A fact District 3 Councilor Cyril MacDonald touched on when he announced that he advises any constituent who asks his advice about renovations to do work “inside” their houses where it can’t be seen:

I refuse to do work to the exterior of my house because I feel I already pay too much in taxes.

(Who’s going to tell him those taxes pay his salary?)


Assessing the situation

The result of all this ciphering is that for 2022, CBRM assessments, both residential and commercial, are up.

The PVSC considered 64,924 property accounts in CBRM and reached a total assessment value of $7.3 billion (up 5.5%).

Within this total were 3,749 commercial accounts with a total assessment value of $1.6 billion (up 2.7%) and 61,175 residential accounts with a total assessment value of $5.7 billion (up — as noted above — 6.31%).

2022 CBRM Assessment Profile

Source: PVSC


This next slide puts those percentage changes in recent historical context:

CBRM Assessment Profile History

Source: PVSC


And this one breaks the assessment increases down my former municipal unit:

PVSC assessment increases 2022

Source: PVSC.

District 8 Councilor James Edwards, who represents Louisbourg, was understandably startled by that 8.17% increase in assessments in the former town. Penny told him not to worry about the percentage change because in “actual” terms, the difference would represent an assessment increase of “only” $2,500 for the average resident.  Edwards didn’t seem much comforted by this.

Penny’s perspective on the housing market, by the way, comes not just from his day job minding the data rolls but also from his life experience. He told council:

Myself and my family, we do have a couple of properties and trying to buy a property today is so hard.

That sounds to me — and I apologize if I’m wrong, but people don’t usually say “myself and my family have a couple of properties” in reference to their homes — like he’s having trouble buying new rental properties. It reminded me of Deputy Minister of Municipal Affairs and Housing Paul LaFleche telling council, during a discussion of the housing crisis, that he bought his Halifax house for $140,000 and it’s now worth $550,000. Maybe I’m overly sensitive, but I find there’s something slightly off about mentioning your difficulty finding new income properties in a discussion about people worrying they’ll be, as District 1 Councilor Gordon MacDonald put it, “taxed out of their homes.”


Out of Towners?

The question is, why have CBRM assessments increased 6.31% in the past year?

And the answer depends on who you ask.

Councilors like Steve Gillespie (District 4), Deputy Mayor Earlene MacMullin (District 2), Gordon MacDonald and Cyril MacDonald (District 3) say it’s because wealthy, out-of-province buyers (sometimes former Cape Bretoners) are snapping up properties and paying significantly more than asking price for them.

Realtors also blame rising Nova Scotia house prices on out-of-province buyers. This September 2021 article from RE/MAX states:

When tallying the residential home sales in Nova Scotia since the beginning of the year, a record has been set. Cumulative sales for the first half of 2021 have reached 8,407 units. Not only is this a record for year-to-date home sales for the province from January to June, but it is also a steep increase of 53.5 per cent compared to the same period in 2020…

This increase in home sales is being linked to out-of-province buyers flooding the market and pushing out local prospects in order to move to a less expensive part of the country. This stark surge in demand has inflated home prices across Nova Scotia. Come the end of June 2021, the average price of a home sold that month was $366,683 which is a jump of 27.6 per cent compared to the same period last year.

But when I asked the Association of Nova Scotia Realtors for statistics on out-of-province buyers, Tanya White, director of communications, told me they don’t keep them, although they “hoped to implement a tracking system in the future.”

NS Housing Prices chart

The PVSC presenters — most notably MacLeod, who lives in Glace Bay — insisted that out-of-province buyers were not behind the increase in house prices (and therefore assessments).

MacLeod more than once referenced the six houses that have had sold recently on his own street, all of which, he said, were purchased by people from Glace Bay. Property values are rising, he said, due to “low interest rates,” which are driving up demand, and “a lack of supply.”

But when asked by District 5 Councilor Eldon MacDonald if the PVSC had data “as to where home buyers are coming from” the answer was “No.” MacLeod said it can be difficult to know where buyers are from because they often use local lawyers.

This prompted MacDonald to ask the, to my mind, very reasonable question: “if we don’t have that data, how do we know that [buyers are mostly local]?”

At that point, Adam Hanna told council that while real estate websites are reporting average Nova Scotia residential sale prices are up 20% to 25%, assessments in CBRM, including new construction, are up only 6% which, he said, is because it is “clear to [them] when someone overpays” and they base their assessment on the “whole market together.”



The PVSC actually did some preliminary research, in collaboration with Dalhousie Economics Professor Talan Iscan, into Nova Scotia’s “COVID Real Estate Boom.” After noting that demand for residential real estate was high in Nova Scotia even before COVID triggered “a sudden, dramatic escalation in market price,” Iscan considered a number of possible explanations for this escalation.

One — the possibility that it was due to an influx of “international newcomers” — he dismissed out of hand, given how radically immigration declined during COVID.

That left him with low interest rates and increased savings (due to “severely curtailed” discretionary spending), both of which he felt were likely factors.

As for “inter-provincial migration,” Iscan did not dismiss it out of hand, writing:

…it is difficult to tell from demographic data alone whether this could have contributed significantly to the spike in demand for homes. This merits further investigation, as the future of work could have radical impact on markets and community planning in Nova Scotia.

In other words, he agrees with Councilor Eldon MacDonald. Iscan then raised another possible explanation for rising house prices:

…there have been reports that private equity has been undertaking bulk investment positions in single-family residences…it is not unreasonable to think that higher household savings combined with concentrated funds from large investors were a factor behind the surge in demand…

This last factor, the financialization of housing, would also seem to merit further investigation.

Ultimately, though, Iscan writes:

Overall, this analysis suggests that high-level factors such as national economic policy may have had the greatest impact on the sales prices increases observed in Nova Scotia.


Supply vs. Demand

As it turns out, what was playing out between the councilors and the PVSC reps is part of a raging debate in this country over whether the over-heated housing market is the result of out-sized demand or under-sized supply and a related debate over whether the solution is to rein in demand (through measures like the Houston government’s plan to introduce a levy on property taxes for non-resident property owners) or increase supply. (Here’s a sample of that debate from a January 2022 CBC article about a proposed new tax on homes valued at over $1 million.)

It’s beyond the scope of this article (and frankly, of my brain) to draw any conclusions about the local housing market from all this, although I would point out that Stats Canada has recently (as in, since 2017) begun tracking non-resident home ownership in certain parts of the country, including Nova Scotia, via its Canadian Housing Statistics Project.

The most recent numbers are from 2020 (which the agency terms “pre-pandemic”) and show that the “share of residential properties owned by non-residents” in Nova Scotia declined from 4.0% in 2019 to 3.6% in 2020, which still left us with higher non-resident ownership than the other provinces included in this particular data update, namely New Brunswick (2.9%), Ontario (2.2%) and British Columbia (3.1%).

And Joan Baxter, writing about the government’s proposed levy for non-Nova Scotia residents, discovered that information about “who is and who is not a resident of the province is self-reported by the purchaser when they buy property, and is only collected for parcels of land that have been added to the titles system.” To date, the province has collected information on the residency status of the owners of the 63% of land parcels that have been migrated to the Land Registry.

Blaise Theriault, spokesperson for the Department of Service Nova Scotia and Internal Affairs, told Baxter that “approximately 5% of the registered land mass of Nova Scotia is owned by non-residents or a mix of residents and non-residents.”

The data shows that the highest percentage of non-resident land ownership in the province is in Halifax County (0.64% of the province’s total migrated parcels), followed by Lunenburg County (0.63%), then Inverness County. (0.55%)

I highly recommend Baxter’s article, which takes an in-depth look at the issue of non-resident ownership in Nova Scotia.


To the moon

Whatever is behind it, the increase in the average sale price of Nova Scotia homes is real.

The Nova Scotia Association of Realtors is reporting that the average price of a home sold in this province in January 2022 “was a record $392,828, a sizable gain of 23.2% from January 2021.”

Cape Breton, with 67 residential sales in January 2022, saw the biggest year/year increase in sales — 28.8% — while the average price here, although the lowest in the province at $184,056, represented a year/year increase of 31.4%.

Nova Scotia Association of Realtors' January 2022 summary

Source: Nova Scotia Association of Realtors.

These rising prices have had an effect on tax assessments across the province but this article is long enough, so I’ll discuss increased assessment rates and the effect of the CAP in Part II.