When skyrocketing property values heap pressure on clients, this advisor is helping them make the right calls and walk back poor decisions
Nova Scotia is skyrocketing. The maritime province hit a net migration rate of 14% in 2022, according to StatsCan, a number that’s climbed rapidly since the COVID-19 pandemic. The rise of remote work has pushed Canadians, largely from Ontario, towards Nova Scotia’s comparative affordability. In doing so, these internal migrants have contributed to an explosion in Nova Scotian property values.
In 2019 the average residential price in Nova Scotia was less than $250,000 according to the Canadian Real Estate Association (CREA). In 2022, for the first time in the province’s history, average residential prices climbed above $450,000. Prices hit their historic highs again earlier this year.
Brian Himmelman has been in the trenches through this property boom, helping clients who might be seeing their ‘paper wealth’ rise with their property values. The President & Senior Financial Advisor at Himmelman & Associates Financial Advisors with Manulife Securities explains that as the landscape shifted, many Nova Scotians moved to cash in on their property values or help their family members into properties of their own. Now as interest rates rise, the debt they took on is becoming costly and he’s helping them walk things back.
“Over the past two years there’s been a bit of frenzy everywhere,” Himmelman says. “My average clients are in their mid to late 60s and they never would have anticipated their houses becoming worth this much. If that had stayed with low interest rates, that would have been a windfall…Now people’s lines of credit and carrying costs are in the high 6% or 7%, and that’s creating a bit of a squeeze.”
If his clients took out a new mortgage or line of credit to help family members buy property, Himmelman is now working on responsible debt management plans. He’s sending his clients back to mortgage brokers to refinance their debts.
As part of his debt management work, Himmelman says he’ll advocate for liquidating investments where absolutely necessary. While doing so could realize losses during a difficult market environment, he argues that expensive debts held in the long-term can do greater harm to a client’s overall wealth. If he has to sell assets for his clients, he takes a targeted and tactical approach to minimize any potential losses.
Himmelman is also starting difficult conversations with his clients around their long-term goals. He asks whether they want to age in their homes or downsize and use their new home equity to finance more of their retirements. The trouble with a downsize, he’s finding, is that Nova Scotia’s new property boom has limited some traditional options for his clients. Where they might have previously moved to a small town in the province, the influx of remote workers has impacted affordability further afield. Rents have risen too, limiting some options for his clients.
In a province gripped by rapid change, Himmelman says his clients face a great deal of pressure to help the next generation. As young Nova Scotians see their options limited, they’re asking their parents and grandparents for help. Himmelman is telling those clients that, as noble as their intentions are, they need to think first about their own wellbeing over the long-term.
“I tend to use the analogy of a plane with these clients. When the oxygen mask drops on a plane, you have to make sure that the mask is securely around your own face and you’re breathing properly, and only then can you help others,” Himmelman says. “So when clients want to help the next generation, we’ll revisit their entire plan and use software to make sure they are sound before we see how much help they can afford to give to the next generation. We show them that they might have to constrain themselves a little bit, or that they might not even be as close to the finish line as they thought. My responsibility is to make sure they get that level of visibility, so they can make a good decision.”