I'm still at a loss to explain whose buying. So we did some digging this morning. Census numbers showed a growth of 5.8% for the CRD in total population between 2001-2006.
I couldn't find year over year data, but this is illuminating none-the-less, is it not? CRD states that housing starts in the district were up 40.4% in 2005-2006 for a total of 7635 units (which includes houses, townhouses and condos). Population in 2001 was 303,539, in 2006 it was 321,144, for a difference of 17, 605. I can't find more recent numbers on average household size than 2001 figures that had 2.4 people per household.
If that's the case then, in 2005-2006, the CRD issued enough permits for 2.3 people for each unit built in that period. Sounds pretty sustainable right? Not really, because that's a two-year period of housing growth measured against a five-year period of population growth. It seems a safe assumption to us that there were at least double the number of units built in the other 4 years combined: 2001, 2002, 2003, 2004. Not to mention the planned development and under construction units that will be ready for 2007, 2008, 2009.
Considering that you'll need a household income of at least $60K for the average condo and $135K for the average SFH it's also a safe assumption that most purchases are being made by combined incomes of at least 2 people. The most recent numbers I have found for average household income in the CRD are from 2000, which I think is too far back to bring into this analysis.
The conclusions: housing starts are up dramatically (though I can't give you an exact number) when compared to the actual increase in population. Does the old "if you build it they will come" ring true? Even if it does, and pop. growth maintains the same momentum and we see 6-7% in the next census period, we will still have seen more units built than can be absorbed by the natural growth of population. So this means that in order to keep the market balanced, enough of those units will have to be purchased to sit empty much of the year (census figures don't discriminate between homeowner/renter). Are there really that many people purchasing vacation homes here?
We can say with certainty that there was a modest price decline in the CRD RE market in the last 6 months of 2006. More certain is there was considerable price compression between neighbourhoods. It is only a matter of months before people figure out this market is grossly distorted from historical buying cycles in Victoria.
UPDATE: thanks to jmk for pointing out my shallow digging. I incorrectly used the number of building permits in the above calculations, so this would include renos and wrongly skew the numbers of units I claimed to be constructed.
Revised numbers based on the same period of 2005/06: I use the net CRD numbers which I added up to be: 5096. This is a difference to my above numbers of 2539 units. It's a substantial decrease in the total 2539/7635 = 33%. It would also change the 40.4% to also include renos (which makes sense with the number of HELOCs that banks would be handing out during a time of significant real estate market gains).
Feel free to correct me wherever my numbers go awry. I'm still fairly confident in the assumptions made above, namely that there are more units being constructed than pop. growth fills, obviously to a lesser degree though now. And there are big gaps in the number of years that CRD isn't reporting.