Thursday, March 22, 2007

Stat Hunting

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.

7 comments:

JMK said...

Hello,

Fun statistcs
I think Residential Building Permits are any kind of building including renos. I think you really want
Dwellings Created and Lost, don't you?

These are for 2005: 2238 and 2006: 2858, with most of the increase in 2006 in multi-family dwellings in the core and Western Comms. The total is 3096 for both years.

Are these numbers large? 2858/88310 total dwellings in 2001 is a 3% increase in units for one year. Pretty hefty if the population is only increasing 6%/5 years. On the other hand, rentals are scarce, and real estate is expensive, so I guess there is a demand to be met.

Vicguy said...

Here's an eye opener I found on mohicans site...talk about slimy real estate agents. No wonder the numbers don't add up sometimes when this crap goes on.


http://www.theglobeandmail.com/servlet/story/LAC.20060916.HOUSES16/TPStory/TPEntertainment/Ontario/

JMK said...

^ That sucks. You can get an MLS history for most places and see if this has been done or not. If I saw something like that I'd report it to the Real Estate board. OTOH the pres of the TO board didn't sound too shocked so maybe nothing would happen?

hhv said...

jmk,

Thank you. Apparently I didn't dig deep enough.

I will make changes to the original post shortly.

VicGuy,

That article just points to a situation that sucks. I'd liken it to the numbers released today regarding potential insider trading on the TSX. The system is ripe with ethical issues because those that stand to gain from its abuse, investigate its abuse.

JMK said...

I added up to be: 5096

Ooops, you are right. I can't do arithmetic, or type. I forget which in that particular case.

dwb said...

I read that article as well in the Globe. There's so much regulation with the stock market but almost no regulation for that kind of crap in Real Estate. Disappointing really.

Scary for RE stat followers like myself too.

By the way, I just came across this house hunt Victoria blog.... it looks great!

DWB

http://www.londonontariorealestatediagnosis.blogspot.com/

Roger Need said...

I have been doing some analysis of VREB stats. I find that the numerical format of VREB does not lend itself to trend analysis. The sales/listing ratio is not published so I have calculated it as well. Lately, I have been very curious about the supply of RE product (total active listings) versus demand (RE sales). I have plotted this data and extrapolated for the balance of 2007 using data from 2005 and 2006 as a "future predictor".

You can see the results at my site:
www.members.shaw.ca/needinbox