Friday, June 08, 2007

CHMC Vancouver Starts, Completions and Under Construction

CMHC publishes housing starts, completions and units under construction every month and the VHB diligently kept some historical records of this and I have decided to carry the torch, so to speak. I think the numbers can help us gauge a part of the supply picture in the local real estate market and thus give us insight into possible future price adjustments.

Units under construction is running near the 22,000 unit level and has been at that level for about a year now. Starts have come down from their highs of over 2000 per month and completions are also running lower. It appears that labor availability is having a negative impact on the ability of developers to complete projects in a timely fashion.

As mentioned in the previous post, population growth has been low so the current construction completions are competing for fewer people than before.

Interesting numbers, I am a little surprised at how low the new people per completion is. Especially considering we have an average household size of 2.6.


rentah said...

The Chinese stock market has peaked and is likely about to start a second downleg that'll eventually take it to 50% off. The other major Asian, European and NAmerican markets have noticed and are starting their own corrections.
Interest rates/Bonds are tightening everywhere.
Risk premiums are increasing,
Volatility indices have bottomed.
Liquidity has turned around.

Therefore, Vancouver RE will peak this month, June 2007.

--- crossposted on sister site ---

Craig said...

This entirely speculative but I wonder how accurate the population data is. For example, I believe censuses usually undercount actual population to the extent that several years ago a post-census audit determined the undercount for Canada's population was by 3.1%.

Further, is it clear how many new arrivals take part in the census? For example, it is also a legal requirement to file a tax return but note how many immigrants file:

"The incidence of personal income tax filing for Canadians 20 years of age and over in 1995 was roughly 91%. The comparable figure for immigrants 18 years of age and over as captured in the IMDB was 57%."

Add together a 3% undercount and a situation where, for the example of tax returns, almost half of immigrants are essentially flying below the government's radar and I think there is reason to take your population figures with a grain of salt.

Van Housing Blogger said...

I find the under construction number the most fascinating. All the construction in town is moving *so slowly* so that number just won't seem to come down.

IIRC, it is at historic highs.

Can you say 'supply overhang'?

jesse said...

"I think there is reason to take your population figures with a grain of salt."

I disagree: Statscan knows the "participation rate" (as your references indicate) so they must know total population. Every citizen and legal immigrant is known to the government. Unless previous censuses but not the most recent one were revised, I see this as an offset error only. The derivative is the topic of discussion.

But I agree with a corollary: I don't know how the population figures account for temporary residents (students, foreign workers, visitors, etc.), who arguably are more prevalent today in Vancouver compared to 5+ years ago.

mohican said...

vhb - nice to hear from you - couldn't resist the pull of your charts eh! Construction does seem to move at a snail's pace these days with every developer vying for contractor's attention and then the contractors spread themselves around so nothing ever gets actually finished.

IIRC = Insn't It Really Cool? or If I Read Correctly?!

The supply over-hang / hang-over from this real estate boom is going to leave some developers hurting.

Unknown said...

IIRC = if I recall correctly

Unknown said...

I think there is reason to take your population figures with a grain of salt.

Stats are always estimates, but the comparison over time still holds.

domus said...

OK, let's suppose that there is an underestimate of 3% (but I am reluctant to believe it).

Two things:

1) What matters in these things is the direction: if population growth is trending down and housing supply is trending up, Mohican's data document a clear change from the past;

2) If you are off the radar and you don't file taxes of any kind, then you can arguably not afford to buy anything. Likely you rent and possibly you share with other people.

Swirlyman said...

It appears that labor availability is having a negative impact on the ability of developers to complete projects in a timely fashion.

This is already happening in PoCo. There was an article in the Tri-City News about a protest by condo-owners against their developer that will be happening on Saturday (tomorrow).

Here are some quotes:
"Would-be Riverbend homeowners may have to shell out an additional $100,000 to keep their homes.

In a report regarding the economic viability of completing phase three of the Coquitlam development, court-appointed receiver David Bowra said the “best option to solve the real-estate debacle would be finishing the units and later selling them at current market value.

That means buyers who purchased homes for an average price of $348,0000 between April 2005 and January 2006 would need to pay between $420,000 and $454,000 under today's market, according to the report.

It would also mean primary lender CareVest Capital Inc. would need to inject an additional $3.8 million to complete construction."

"Last month, CB Development 2000 Ltd. operated by Craig Lochhead of Coquitlam cancelled 32 pre-sale contracts with buyers because CareVest would not release mortgages unless units were sold for current market prices. Last Thursday, the project was put into receivership after the developer's insurance company gave cancellation notice due to inadequate security. Foreclosure proceedings are also underway."

"There is approximately $600,000 in outstanding payments to tradespeople and contractors, according to the report, and numerous liens have been filed.

The issue will go before the courts Monday, when both sides may argue whether the remaining units should be finished and, if so, offered for sale on the current market or under the existing contracts.

Lawyer Shane Coblin, who is representing a number of buyers, said Wednesday it was too soon to say how he will respond to the report on behalf of his clients.

Meanwhile, Riverbend buyers have organized a rally for Saturday, June 16 at 11 a.m. to help gather support for their cause."

Swirlyman said...
This comment has been removed by the author.
Swirlyman said...

Coquitlam Now has a longer article on the Riverbend fiasco with a unique URL that points to it. It got cut off in the previous (deleted) post, so I generated a tinyURL:

Patiently Waiting said...

Vancouver is very bad place to be down on your luck. So many people don't even have a couch to sleep on or a decent meal to eat or a clean pair of socks. I'm sorry, but when you are middle class you should not expect anyone else to protest on your behalf.

20/80 said...

Maybe if these people were not out all night stealing car stereos and boulder toking maybe they would have a couch to sleep on,and a decent meal to eat. Middle class should be protesting for each other. Excuse me for being off topic.

Patiently Waiting said...

Oh yeah, I forgot that middle class people never steal or take drugs.

Patiently Waiting said...

From the Coquitlam Now story:

"Gonzalo Ledezma's prospective home lies along a row of half-finished units at the back of the development site. Ledezma will be attending the protest alongside his would-be neighbours, some of whom are already living in their finished Phase 2 homes awaiting final touches such as landscaping and painting.

"We're going to have a day here of yelling and screaming and telling stories," Ledezma said. The 33-year-old electrician had to move into his parents' home with his wife and two kids after he sold his home expecting to move into Riverbend."

Something doesn't quite add up here. Why did he sell his old home while his new one is half-finished? At least he could have arranged for a rental in the meantime instead of barging in on his folks (I hope they have a mansion). Surely, he can afford to rent a suite if he's about to buy a new house and has already sold his old house. Or is he too good to rent?

Unknown said...

Aside from getting on the news, the protest will accomplish nothing. It's a legal issue at this point.

These people are probably screwed either way. Perhaps undeservedly so, as they were no more stupid & greedy than anyone else, just unlucky.

However, the lesson to be learned is that pre-sales necessarily involve risk. Caveat emptor.

Patiently Waiting said...

How screwed are they? Unless they are losing their deposits, all they lost was "equity" which would have disappeared eventually, anyway. Right? Heck, maybe they'll benefit by buying after the bubble deflates.