Housing starts rebound
Canada Mortgage and Housing Corp. figures show that housing starts in the Vancouver CMA – the census area that approximates Metro Vancouver – topped 19,000 in 2012, one of just five years in the past 20 this has happened. The all-time record for housing starts (21,834) was set in 1989. The tally was almost matched during the construction boom of 1993-1994, but it’s only been since 2004 that starts began to regularly approach the record. The most recent peak of 20,736 starts was set in 2007; two years later, housing starts fell to just 8,339 units.
But with 19,027 starts in 2012, builders appear to have found their feet.
Weighing starts against population growth, however, a couple of points stand out:
•starts as a proportion of the total population have remained below 1% every year since 1994; and
•starts have kept closer pace with population growth in recent years (exceeding it in just one year, 2004).
Crunching the numbers, Andrew Ramlo, director of the Urban Futures Institute in Vancouver, said there’s been a decline in the number of people new units are housing even as the population continues to grow.
Ramlo said that in the decade following Expo 86, the population grew by 2.38 people for every housing start. During the most recent decade, growth was 1.67 people for every start.
The reason for the fewer number of people per new unit?
“It could be demography – people having smaller households,” he said, noting that the average family is smaller now than in the 1980s, and the number of empty nesters is increasing.
Indeed, the 2011 census indicated that 36.8% of Vancouver CMA residents live alone.
There’s also been a shift toward densification, thanks to the region’s constrained land base and the encouragement of transit-oriented development – most often apartment towers. The phenomenon has been accelerated in recent years by affordability concerns.
“We have to use the land more intensively to try and slow the price increases down,” Ramlo said.
“We build either more in terms of higher density or we build smaller in terms of unit size.”
The trend is borne out by the numbers, which show a rise in multiple-unit starts since the 1960s – from 52% of the total in 1962 to 82% last year.
What others say
Since the tide of negative numbers regarding the housing market began rising in earnest last fall, it’s been a curious exercise tracking the dour comments from market observers (usually in Ontario) regarding Vancouver (which has its own professional bears).
During a brief chat with this columnist last fall, Robert Hogue of RBC Economics characterized Vancouver as a volatile market that tends to sharp increases and massive corrections.
“The swings have been larg er than in any other market,” Hogue said, contrasting it with sober price appreciation in other markets in recent years.
“Most of them did not experience the serious run-up in the same way as Vancouver in terms of prices, so they’re less vulnerable to a major correction.”
The transcript of a conference call BMO Financial Group recently hosted for media (which the bank kindly forwarded), highlights a similar caution.
Citing a decline of approximately 3% in the benchmark house price in Vancouver since last spring (the regional decline is actually 5.5%), BMO senior economist Sal Guatieri opined: “We see further declines in home prices for this year. That would not be surprising or exceptional as the city has faced four double-digit price corrections in the past three decades.”
Of course, past performance is no guarantee of future returns, and Guatieri dovishly projected a mere 5% drop in prices through 2013 later in the call. A subsequent statement BMO issued last week declared a “soft landing” in housing markets.
Conrad Zurini, broker of record with Re/Max Escarpment Realty Inc. in Ancaster, Ontario, told media a strong economy is buoying Vancouver’s prospects. “People are very anxious, but again I think it’s going to be a short-term pain. ... In the medium to long term I think people in Vancouver are very optimistic.” •
