Halifax economy holds strong

Posted on 14. Dec, 2009 by in News

A population that is rising at an annual rate of one per cent, a robust economy and strong employment numbers may sound far-fetched in today’s world – but this is exactly the situation in Halifax, N.S.

Sept. 24, 2009 – A population that is rising at an annual rate of one per cent, a robust economy and strong employment numbers may sound far-fetched in today’s world – but this is exactly the situation in Halifax, N.S. These factors further contribute to the healthy conditions of the real estate market, where vacancy is low and prices are affordable.

The local economy is continuing to grow with few layoffs and employers that are still hiring, says Scott Grace, local Realtor at Exit Realty Professionals. He explains this is contributable to the offshore energy, IT, Aerospace and construction industries. In fact, the seasonally adjusted employment rate in Halifax jumped from 213,000 in December 2008 to 214,000 in January 2009, and then to 215,000 in February 2009.

“Our unemployment rate did jump from 5.3 per cent to 5.9 per cent in the same period but that can be attributed to returning families from out west. The main thing is that the number of jobs is increasing, as well as the average pay,” Grace says.
Though Nova Scotia’s real estate sales activity was down 15 per cent in March 2009 from March 2008, it was still the highest level of housing sales activity in the province in five months, as reported by the Nova Scotia Association of Realtors. In January 2009, the year-over-year decline was 32 per cent.

Edging down one per cent from March 2008, the provincial average price for home sales was $188,651. However, in Halifax the price rose slightly by 1.6 per cent to $229,548. The small decrease in provincial average price was the result of fewer sales in the outer cities.

“We are seeing a continuing increase in not only property assessments in the Halifax Regional Municipality but increases in market value of most real property,” adds Grace. “We have not encountered the boom and bust cycle that some other areas of Canada have experienced.”

Dave Logan, local sales representative at Century 21 Classic Realty Ltd. agrees, stating that the spring market is picking up sales-wise. “Canadian Forces posting season is upon us and the government increased postings by 10 per cent to 20 per cent to stimulate the local economies,” he says. “That is why 36 per cent of homes in the Halifax area sell in the spring with the military acting as the main catalyst.”

The vacancy rate in Halifax rose slightly to 3.4 per cent, from 3.1 per cent the year prior, according to CMHC. The recent rise is contributed to low interest rates hovering at about four per cent, causing some renters to move into home ownership. However, vacancy is still considered low, and expected to edge lower with fewer multiple starts throughout the year.
“Developers are finding that a labour shortage is creating problems with getting projects completed and is causing delays in getting new ones started,” says Grace. He expects this, along with families returning from out west, will push the vacancy rate down.
Major employers include the Navy, Air Force, universities and hospitals, and those that work there tend to be the typical renter demographic. As well, the large student population, which is over 30,000, also rents.

Triplexes and Four-plexes are a great investment and are very popular with students in the south end and central part of Halifax, says Grace. The average price of one of these units is about $500,000 and average net revenue per year is $35,000. “They have really low vacancy rates and there can actually be a waiting list for ones that are close to the universities.”
One example is a Victorian-style duplex with a listing price of $500,000. The property is just blocks away from Dalhousie University, and has five bedrooms upstairs and four on the main floor. The gross income is about $60,000, with a net about $53,000, says Logan. Tenants pay for utilities.

“With a 20 per cent down payment of $100,000, you are looking at $2,000 monthly or $24,000 annually on mortgages,” says Logan. “Rental notices posted at the student union building are jumped on and often properties are rented within days of posting.”
For investors targeting young professionals, Navy or Air Force employees as their tenants, it’s advised to purchase condo units close to the downtown core. Keep in mind this renter demographic has a salary of about $60,000, and can typically afford about $1,200 per month in rent. Investors should opt for buildings with security and underground parking, since these items are sought after by professionals and government employees for various reasons (ex. Navy workers can be away at sea for three to six months each year).

A one-bedroom condo on the peninsula has a sale price of $125,000 on average, says Logan. With a 20 per cent down payment of $25,000, interest rate at four per cent and 35-year amortization period, this would afford a monthly mortgage of about $450, leaving up to $750 in cash flow per month.

From the August 2009 issue of Canadian Real Estate

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