Nicole Daniels, Author at Normac | Canada's Insurance Appraisal Experts

The Road to Net-Zero Energy Buildings

Net-zero energy buildings are becoming increasingly popular in Canada as the government and private sector strive to reduce greenhouse gas emissions in an effort to mitigate the effects of climate change. A net-zero building can be defined as one that is constructed to be highly energy-efficient, where the amount of energy used on an annual basis is equal to the renewal energy that is created on site.

The Canadian Green Building Council has set a goal for all new buildings to be net-zero energy ready by 2030, while the federal government of Canada has established a goal to achieve net-zero emissions by 2050. Canadians are expected to save as much as $3-$5 for every dollar the government spends on energy efficiency programs.

To meet these targets, building codes and standards are being updated to require higher levels of energy efficiency. The Government of Canada will be providing the tools for new buildings to implement these technologies when built, and assist older buildings in developing a retrofit plan to get up to standard. There are also various incentives and financing options available to encourage construction of net-zero buildings including a $2 billion Low Carbon Economy Fund that the government has introduced to support the efforts of developers and homeowners

Some of the benefits of net-zero buildings include:

Reduced energy costs – Reducing reliance on the grid, resulting in lower energy bills and operating costs.

Reduced carbon emissions – Generating their own clean energy and reducing the amount of carbon emissions produced.

Improved indoor air quality – Maximizing natural ventilation and improving indoor air quality, which reduces the need for mechanical ventilation systems.

Enhanced resilience – Highly resilient and able to operate during power outages or other disruptions to the grid.

Increased property value – Net-zero buildings are highly desirable to tenants and buyers, which can increase their property value and make them more attractive to investors.

Source: https://www.rockwool.com/north-america/advice-and-inspiration/blog/net-zero-energy-building-a-quick-reference-guide-to-energy-neutral-sustainable-building

Here are some ways to make your building net zero:

Renewable Energy – Install renewable energy systems like solar panels, wind turbines, or geothermal heat pumps to generate the energy needed to power the building.

Energy Monitoring – Have energy monitoring systems to track energy use in real-time.

Energy-Efficient Lighting – Install LED lighting systems, which use significantly less energy than traditional lighting solutions.

Energy-Efficient HVAC – Install energy-efficient HVAC systems that use less energy to heat and cool the building. This can include high-efficiency boilers, chillers, and air-handling units.

Energy-Efficient Appliances – Install ENERGY STAR certified appliances that minimize the use of natural resources such as oil, natural gas, coal, and water.

Green Roofing: Install a green roof which can help regulate the temperature of the building and absorb rainwater runoff.

Sealing and Insulation: Ensure that the building envelope is airtight and insulation is adequate against air and moisture intrusion.

Source: https://www.efficiencyvermont.com/blog/how-to/how-to-make-your-home-net-zero

How do building codes affect appraised values?

As building codes are updated to adopt more energy efficient technologies, construction costs will also fluctuate according to the new standards. For example, it is expected by 2032 that the standard window will be triple glazed with a high-performance frame. Building code and by-law review is a key factor when determining the cost to rebuild a property, and thus an insurance appraisal done on an annual basis is critical to ensure your limits are adequate.

Normac’s team of expert insurance appraisers are trained in local construction costs, taking into account the nuances and changes in building codes. We provide three-year programs with annual updates, ensuring you assets are adequately protected in the event to a total loss. Contact us today to inquire about an insurance appraisal for your property.

2023 Canadian Construction Cost Trends

Following a tumultuous year for Canadian construction costs, 2023 will provide some reprieve for property owners with cost increases beginning to flatten. Having said that, it’s important to keep expectations in check: costs won’t be decreasing, but increases will be less severe than what we witnessed in 2022.

Download our newest publication to learn about the biggest impacts to construction costs in Canada and how they will impact appraisal values this year.

Insuring Your Property to its Full Replacement Cost

All property owners should obtain regular insurance appraisals in order to protect their biggest asset. An insurance appraisal ensures your property, whether that is your home or your business, is insured to the full replacement cost value in the event of a total loss.

Without one, owners could be left at significant risk of underinsurance or liable for losses suffered by others.

Our 2022 Year in Review

Another year is coming to an end and Normac has plenty to show for all of our accomplishments in 2022. Across the country, our teams are actively involved in our local industry associations ; we attend and sponsor events, support charity functions, and provide valuable insight for various educational seminars. While our business development teams are out representing Normac, our appraisal and client services team are kept busy working behind the scenes, serving clients coast to coast. To wrap up 2022, we’d like to share some highlights from all of our regions in Canada and the USA.

British Columbia

As an associate member of PAMA and elected member of the Associates Committee, we annually sponsor the Whistler Great Escape Conference, Casino Night, the summer golf tournament, the Christmas luncheon, and the bi-annual Real Estate Conference in the Sun, in Huatulco, Mexico this year.

We also support our local REIC / IREM chapter and were thrilled to sponsor their events throughout the year, especially the Holiday Reception hosted at the Vancouver Aquarium!

In February, our BD Associate, Omar Khan, presented alongside BFL Canada in a CCI BC Chapter seminar. In November, our Senior BD Associate, Nicole Daniels, was also elected to the Board of Directors for the CCI BC Chapter and she looks forward to helping the chapter thrive through 2023.

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Alberta

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After a 3 year hiatus, both CCI North Alberta‘s ACE Condo Expo and CCI South Alberta‘s ACR Conference were back live. For the first time ever, we exhibited as Normac Reliance. During the ACR Conference, Omar presented another session with BFL Canada on construction cost and insurance trends in the condo market.

We also sponsored both CCI North Alberta and South Alberta’s annual, sold out golf tournaments. Normac was the Platinum sponsor for the 13^th annual Astoria Golf tournament in support of the Airdrie Food Bank and the 4^TH Annual ACMS Charity Tournament.

It wouldn’t be summer in Alberta without the Calgary Stampede; Harold Weidman and Kim Lozinski cheered on our clients at Simco Management during the chuck wagon races.

Manitoba

After sponsoring a virtual event, Normac was asked to present to CCI Manitoba on the importance of appraisals and the current state of costing to the industry group. Omar delivered the presentation virtually and it was the first time an appraisal firm presented to the CCI Manitoba members.

In the Fall, Omar made a visit to Winnipeg to meet with some of our insurance and property management clients and to attend the CCI Manitoba AGM. The after party was hosted at Fort Gibraltar and featured axe-throwing. Bullseye, Omar!

Ontario

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Our team in Ontario exhibited at multiple events this year, including PM Springfest, ACMO and CCI Toronto‘s Condo Conference, and CCI-Eastern Ontario‘s Ottawa Condo Conference. We also had the pleasure of speaking on the insurance panel for the CCI-Grand River annual conference alongside Atrens-Counsel Insurance Brokers.

Over the summer, we teed up for the annual CCI-Grand River Golf Tournament, ACMO Golf Tournament, as well as the MRCM Golf Tournament in support of Associa Cares.

The team at Normac also hosted several client functions throughout the year with our industry colleagues from Detail Roofing, including our Summer and Christmas parties. Our Client Services Administrator, Autumn Samonig and Property Information Collector, Andreia Vilaca enjoyed getting out with BD Associate William Shin for many of these events.

Nova Scotia

Since becoming a member in 2021, Normac has had the honour of sponsoring and speaking at multiple CCI Nova Scotia virtual seminars, four of them just in 2022. Most recently, we sponsored a session lead by BFL Canada on Risk Management and enjoyed connecting with some of the audience during and after the presentation

USA! USA! USA!

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This was a big one for us. After years of strategic planning, Normac finally expanded south of the border to the USA. We launched Normac USA in the Spring and officially registered our business in Broward County, located in the Miami Metropolitan area in South Florida.

Our President, Cam Carter, Senior Director, Margarita Carlos, and Business Development Consultant, Cori West brought Normac USA to the CAI USA Conference in May and the Cooperators Expo in South Florida in December. Our beloved Normac pigs stole the show and we were thrilled to introduce our services to the local industry.

Since our US inception, we have also provided our appraisal services in the states of New Jersey, New York, Minnesota, and Arizona.

Our Team

One major accomplishment we are proud to share is achieving our automation goals. This project has been six years in the making and we have finally launched our proprietary appraisal app software across Canada, streamlining the appraisal process to serve our clients more effectively.

It is because of our people that Normac is the successful business that it is today and 2022 marked the 10 year work anniversary for our Director of Client Services, Shari Dawson. Shari is a name most all of our clients have come to know and trust and we’d like to acknowledge her for always upholding Normac’s values and helping us to achieve our reputation for exceptional customer service.

Our Normac family continues to grow; this year we welcomed new team members across the country in Calgary, Kelowna, Toronto, Winnipeg, and Vancouver. We were also thrilled to welcome two baby boys in our Vancouver office – Elliot and Dallas – whose moms are the real Normac MVPs this year.

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2022 was a record year for us and we are excited to continue that momentum into 2023. Heading into our 25^th year, we look forward to expanding our services into more new territories while maintaining our reputation as the go-to company for insurance appraisals within our established regions.

We want to thank all of our clients, partners, and team members and their families for their ongoing support and loyalty throughout the years. We could not do any of this without you. Wishing you all a very joyous holiday and all the best for the New Year.

What’s Up with Canadian Interest Rates?

Unless you have been living off the grid for the past year, you are likely aware that inflation in Canada is high. To be specific, it hit a 39-year high in June 2022 and the annual rate of inflation is currently at 7.0 per cent. The Bank of Canada typically aims to keep inflation within the inflation-control target range, with 2.0 per cent being optimal. Everyone is feeling the burn of rising goods and services prices, however property and condominium owners are being hit extra hard by rapidly increasing Canadian interest rates.

Canadian Interest Rates

On September 7th, the Bank of Canada increased the policy interest rate by 0.75 per cent to 3.25 per cent in an attempt to cool inflation, with more rate hikes projected for the near future. The next rate decision will be made on Oct 26th and Canadians have been told to expect another half a percentage point. Bank of Canada Governor, Tiff Macklem, explains that the current increases are part of one of the “steepest and fastest tightening cycles we’ve ever conducted.”

Source: The Conversation

By increasing Canadian interest rates, the Bank of Canada is attempting to curb inflation. Raising the interest rate discourages borrowing and spending and encourages saving. As a result of this, companies then increase their prices more slowly, or may even decrease them to encourage demand. Macklem assures that raising interest rates will “help relieve pressures here in Canada.” However, for any monetary policy changes, there is a delayed impact of 12-18 months so Canadians will have to wait until next year for inflation to come back down.

Housing Prices + Mortgage Rates

Currently, 5-year fixed mortgage rates are as high as 6.49 per cent. TD Chief Economist Beata Caranci explains that Canadians have been shielded for decades from inflation volatility so today’s inflation might seem especially challenging. It appears that the Bank of Canada learned from the interest rate hikes they implemented in the 1980s and has taken a more proactive stance this time around to bring inflation down to normal targets. Additionally, Caranci claims that there are important differences between today’s situation and that of the 1980s, including a different makeup of the economy and the application of safeguards like mortgage stress tests which ensure mortgage holders can weather changes to interest rates

The Bank of Canada has been successful at keeping inflation between their target of 1-3% for the last 30 years. Check out this video from Bank of Canada highlighting the importance of inflation targets.

Source: Bank of Canada

Increased borrowing rates have pushed many potential buyers out of the market, and a recent survey conducted by Royal LePage and Leger found that 19 per cent of respondents are putting off buying a home since the start of 2022. On the other hand, higher rates are having a cooling effect on the market. An RBC analysis suggests that housing prices will continue to come down and bottom out at 14 per cent by spring 2023. Currently, the average home price in Canada has dropped 3.9 per cent but in some areas of Ontario, prices are down as much as 23 per cent.

Source: CTV News

Market Value vs. Replacement Cost Appraisals

In light of declining home prices, we are frequently asked how this affects Normac’s replacement cost appraisal valuation. For example, if the price of my home is going down, why isn’t my insurance appraisal valuation also decreasing? The simple answer is that the two are evaluating entirely different things.

A market value appraisal is tied to the land value and considers things like comparable properties prices, future income potential, or historical sale prices. For insurance appraisal purposes, we are solely looking at what the cost would be to rebuild a similar structure following a total loss in today’s market. Our valuations are tied to the cost of construction and so whether your market value appraisal has gone up or down, this will have no impact on the total insurable value our appraisers are reporting.

Normac’s team of expert insurance appraisers are trained in local construction costs. We provide three-year programs with annual updates, ensuring your assets are always adequately protected. Contact us today to inquire about an insurance appraisal for your property.

Interest Rates

Do Not Be Underinsured

When people ask us why they need an insurance appraisal done every year, or why they need one at all, the number one thing we tell them is that a current appraisal ensures that they have enough insurance coverage in the case of a loss.

Do not gamble with the biggest asset in your life – your home.

The Consequences of Being Underinsured

In August of 2019, a three-alarm blaze tore through an apartment complex in Chilliwack. Investigations determined smoke materials started the fire on a fourth-floor balcony. The fire quickly breached the attic space and by the time fire crews arrived, there were flames as high as 30 feet shooting in the sky.

Fortunately, no one was injured but 60 families were displaced in the disaster. Over 16 months later, those families are not yet back in their homes, and to make matters worse, they are facing thousands of dollars in special levies. It turns out, the strata was underinsured by $3.2 million. Now, each unit owes between $36,000-$57,000 to make up for the shortfall in coverage.

Read more about this story here: https://www.cbc.ca/news/canada/british-columbia/condo-insurance-fire-1.5829511

How Property Insurance Works

When you live in a strata or condominium corporation, a portion of your monthly fees goes towards paying for annual insurance premiums. Insurance policies are valid for a one-year period and the adequacy of the insurance coverage must be reviewed annually. The board must also report on the insurance coverage at each annual general meeting. The strata or condo’s property insurance is intended to cover the structures, common property, landscaping and original standard unit finishes.

In BC, Alberta, Manitoba, and Ontario it is not a requirement to carry your own personal homeowner’s insurance, only a recommendation. Some corporations may write into their bylaws that owners must carry personal insurance to cover things like high deductibles. Homeowner’s insurance would typically cover your personal, moveable assets and any improvements made to your unit. It is advisable to review your condo’s insurance policy with your insurance broker to determine if additional coverage is required to help protect yourself.

Derek Wubbs, one of the unit owners from the Chilliwack apartment complex, believed that he had sufficient coverage through the strata’s insurance and did not have personal home insurance for his few valuable possessions:

"I was under the belief that paying my strata fees would result in the appropriate building insurance being purchased."

Why You Need an Insurance Appraisal

An insurance appraisal provides an estimate of total replacement cost for a property in the event of a total loss. This is called the Total Insurable Value (TIV) and it is used for placing accurate and sufficient property insurance. All property owners should have an insurance appraisal completed on an annual basis and here are FOUR reasons why:

1. Sufficient Insurance Coverage

An annual insurance appraisal ensures that you have sufficient insurance covered in the case of a loss. The fire in Chilliwack is a worst-case example of what can happen when you are underinsured.

2. Avoid Overpayment on Premiums

We have seen cases of properties carrying excessive replacement costs, and as a result paying too much for insurance. An annual appraisal ensures you are only paying for the insurance you need, not more.

3. Avoid Co-Insurance

When a property does not have a current appraisal, it may be subject to a co-insurance clause that requires the owners to self insure a percentage of the replacement cost. Under this scenario, in addition to the deductible, the owners will be responsible for paying a portion of the reconstruction costs on a total loss or partial loss.

4. Fulfill Your Fiduciary Duty

Finally, an up-to-date appraisal ensures that council or board members are complying with their Strata or Condo Acts, which mandate that the board insure the property for a value equal to total replacement cost. Without an appraisal, the council or board can be found to have failed in their fiduciary duty to the property owners, as was the case in this 2008 Quebec apartment fire. Only an experienced, professional appraiser who specializes in replacement costs should determine the Total Insurable Value.

Hope for the Best, Prepare for the Worst

While we hope that we are never faced with a major disaster, the results of being underinsured can be devastating. There are liability concerns, major financial risk, and significant hardship that can endure for years.

Avoid any gamble: An insurance appraisal gives you peace of mind that you and your assets are protected.

Functional Obsolescence: Why Take it Into Account

If you’ve lost power in your condo, it’s hard to imagine doing anything other than walking over to your utility closet, opening up your electrical panel, and flipping a switch in your circuit breaker. But for others living in older buildings, it may not be so easy to get power back. Some residential buildings built 30+ years ago are still equipped with fuse boxes. Fuse boxes are usually located in a common area, such as a hallway or a meter room. And unlike a circuit, a fuse will blow when overheated and will need to be replaced. Time to get strata to call an electrician! On the other hand, the internal mechanism of a circuit breaker will trip and shut off the power when there is a surge of electricity. Nothing gets burnt, so there’s nothing to replace. To restore power, you can simply reset the circuit breaker by flipping the switch back on. This makes a circuit breaker the preferred choice between the two, as it can be used over and over again. A fuse box is an example of functional obsolescence.

What is Functional Obsolescence?

You may have never heard of the term functional obsolescence, but there is a pretty good chance you might have seen it. Ever been to an apartment unit that has three bedrooms but just one bathroom? The textbook definition of functional obsolescence according to the Dictionary of Real Estate Appraisal is “the impairment of functional capacity of a property according to market tastes and standards.” Another common (and outdated) feature found in older properties is single-paned windows. There’s a slim chance you’ll find these in newer buildings, as double-paned (or even triple-paned) windows are now the norm due to their energy-efficient, noise-cancelling, and long-term cost-savings qualities.

Functional Obsolescence and Insurance Appraisals

At Normac, our accredited appraisers use a Cost Approach to determine our replacement costs. Estimates are based on replacing a property with an equally desirable substitute, as close as possible to where the property stands now. In other words, we generally assume a like-for-like replacement of all components of the property. However, we must also consider what has changed since the original property was built. There are some circumstances—such as in the case of fuse boxes—where it is safe to assume that existing components within the property will be replaced with a similar alternative, one that is up to current industry and technology standards. Fuse boxes were not designed to deal with today’s electrical loads—they are considered functionally obsolete—and so replacing them with modern circuit breakers in the case of a total loss is a reasonable assumption.

We take functional obsolescence into consideration in this process because in most cases, it will cause the cost per square footage of the property to go down. During an appraisal, we try to estimate how much it would cost to replace the utility in the building rather than how much it would cost to reproduce the exact property.

Copper vs. PEX Plumbing

To illustrate this point, let’s take a look at copper vs. PEX (plastic) piping. Technology often changes the choice of construction materials. Two decades ago, copper piping was the gold standard of plumbing. It is a time-tested water supply line material with its list of pros, but that doesn’t mean that it’s immune to trouble. For one, copper pipes are more likely to break if the water inside freezes. Copper is also a very rigid material, which means it has to be cut and soldered to size, requiring more connections and thus more installation labour. Then there’s the issue of cost. Copper pipes will cost 58 to 68 per cent more to install than PEX pipes.

Conversely, due to its plastic nature PEX pipes can be installed 30 to 40 per cent faster than copper pipes. PEX is also known for its durability. When adjusted for pressure and temperature ratings, it has a predicted life expectancy of 50 years. It is no surprise then why many prefer PEX over copper. Given the higher labour, material, and maintenance costs associated with copper, it is simply impractical not to go with PEX instead. This shows how vital it is for your appraiser to have insight on current standards of material and design in order to produce the most accurate Total Insurable Value (TIV) for your property.

Qualified appraisers will have the specialized skills and training to determine appropriate costing estimates that take into consideration additional factors such as functional obsolescence, current building practices, and technology improvements. For your peace of mind, leave insurance appraising up to the experts. At Normac, our appraisers keep up to date with construction methods, trends, costs, building codes, bylaw, demolition costs, and provincial Condominium and Property Acts to ensure you are paying for exactly what you need. No more, and no less.

COVID-19 and the Canadian Condo Market

Amidst the COVID-19 pandemic, even the experts could not have predicted the strength of the Canadian real estate market – of which includes record high prices and fierce bidding wars – all in the face of double-digit unemployment across the country. “Our views are changing,” says Robert Hogue, a senior economist with Royal Bank of Canada. “The strength in the summer was quite a bit stronger than we might have thought. Clearly, there was pent-up demand from March and April, but we didn’t think it would pop that much.”

WHY ARE PRICES INCREASING?

Of course, a major factor in the overall increase in home sales reflects the record-low mortgage rates we are seeing currently. The prime rate this year has gone down to 2.45%, a sharp decline from 3.95% from last year. Canadians have been able to purchase more expensive homes with the same monthly payments as in the past. Government support programs such as CERB and CEWS have also supported household incomes.

DETACHED HOMES MORE DESIREABLE

In keeping with supply and demand, the single detached or low-rise market may continue to see price increases, however the big-city condo segment is expected to be most vulnerable to post-COVID volatility. As we see a shift from physical offices to virtual/home offices – the demand for larger spaces have increased. Additional factors such as declining immigration and a softer rental market have also played a role in this trend. In June, this year there were 19,000 permanent residencies granted, a decline from 34,000 from the same time last year.

In the beginning of 2020, we witnessed condo prices outpacing that of detached homes. The first quarter of 2020 showed new condo prices in the Greater Toronto Area (GTA) up 14.6% from last year, and resale prices up 8.5%, according to data from Statistics Canada. In Ottawa, the increase was 22.6% for new condos and 15% for resales. Vancouver however, had experienced slight decreases year-over-year. According to the Real Estate Board of Greater Vancouver, apartment home sales had increased year-over-year in August (1,332 versus 1,095), however the shift to detached homes were up 55.1% in comparison to apartments – a modest 19.4%.

THE TOLL ON THE CONDO + RENTAL MARKET

Although we are seeing overall increases in pricing and sales activity, the condo market segment has been trailing behind other home-types since March. “We were seeing stronger sales on the single-detached front,” says Jason Mercer, chief market analyst for the Toronto Regional Real Estate Board (TRREB), “and we’re also seeing more listings coming on for condo apartments, so that’s moving toward a more balanced market.” The shift to suburban locations and preference for more space has also taken a toll on the condo rental market. Rent prices have been declining due to higher vacancy rates and renters are seeing more favourable rent conditions.

The Canadian Mortgage and Housing Corporation (CMHC) has purchased $5.8 billion of insured mortgage pools this year in preparation for COVID-19 related mortgage claims. As of July 1, the CMHC has introduced stricter underwriting criteria – which includes more rigorous credit checks and tighter down payment requirements for insured mortgages. It is safe to say, that for the time being the condo market will continue to see short term uncertainty until a COVID-19 vaccine has been introduced with proven results. The long-term effects of this emerging trend are yet to be determined.

If you are buying into the Canadian condo market, it is imperative that you adequately insure your asset. In fact, most provincial condominium bylaws mandate that all condominiums are insured to their total replacement cost value.

The only way to determine accurate replacement cost is by obtaining an insurance appraisal by a professional 3rd part firm, like Normac. Doing so means you will always be sufficiently insured in the case of a total loss, that you can receive better terms and insurance rates, and that you fulfill your fiduciary duty set by your provincial condominium bylaws.

The Condo Insurance Crisis, Presented by CAI Canada

Normac was excited to participate in the recent CAI Canada‘s first virtual conference, V CON(DO) 2020. We enjoyed meeting people during the virtual tradeshow and we’re pleased to sponsor the panel session, The Condo Insurance Crisis: Where do we go from here?

Watch the full presentation here:

Key take-aways:

Get a current replacement cost appraisal regularly to ensure you are paying the correct premiums and have sufficient insurance coverage.
Get a reserve fund study and maintain your building. This can help to prevent incidents and claims, and make you more attractive to insurers.
Use your insurance for emergencies and accidents, not maintenance.
Upgrade elements after a loss instead of just replacing them. Example: Frequent hail damage? Get a hail resistant roof, such as rubber shingles.

An insurance appraisal by Normac ensures that you always have a current replacement cost value for your property. This means you will always be sufficiently insured in the case of a total loss, that you can receive better terms and insurance rates, and that you fulfill your fiduciary duty set by your provincial condominium bylaws .