First all residential dwelling permits graphed since 2007.
Here are the permits parsed for 1-2 dwelling units only (i.e. SFHs):
Note there is an increase in permit value in the later half of 2009. I am unsure why that occurred.
We turn our attention to the proverbial elephant in the room, multi-unit buildings (i.e. condos):
And a quick look at all permits' value, residential and commercial:
Analysis
- There should be no doubt in anyone's mind that the City of Vancouver has become reliant upon permit revenue to fund its ongoing operations. That the City has announced severe cuts to operations -- layoffs -- should come as no surprise after looking at these data.
- This is the strongest evidence I have seen that there was a severe building recession through most of 2008 and into early 2009, though we all pretty much knew this to be the case without these data. The total number of permits issued through this recession is significantly below what is required to feed the City's average population growth rate of the last decade.
- Permits for SFHs eked out a rebound in the second half of 2009. I am not surprised by this at all given how low mortgage rates were and continue to be. I would expect a continued higher level of permit applications for SFHs through at least the first half of 2010.
- The proverbial elephant in the room is multi-unit permits. While there was a slight resurgence in permits for condos in the latter half of 2009, it is significantly subdued from those heady days earlier in the decade.
- The majority of laid off construction workers must look elsewhere for employment in the coming year.
- Laneway housing started to be reported in November 2009. There were a handful of permits issued: 9. I will be interested to see how successful this scheme becomes in the coming year.
The reason condos are lagging is that they are the most difficult type of real estate to develop. It takes longer to get your ducks in a row before you pay for your permits.
ReplyDeleteAnother reason is that developers are rethinking their product mix to hit price points (e.g. due to HST).
No need to worry, because those numbers will bounce back pretty quick. Trust me on this.
I hope that the numbers bounce back soon. There will be hell to pay if it doesn't.
ReplyDeleteWhy might it not bounce back? Might happen if land owners decide to hold back. We saw that in late 1990s. See VabHousing Blogger's chart.
The reason condos are lagging is that they are the most difficult type of real estate to develop.
ReplyDeleteNot because they require major project financing, and the banks and other lenders are getting a bit nervous about RE? And maybe somebody is getting the message about those falling condo rents?
OK if you say so Dave.
Yes, financing matters as well (it's one of the ducks) and banks have a tighter grip on their money to be sure. But banks also make money by lending, so they can't sit out of the game forever either.
ReplyDeleteSome developers go in with their own cash in any cash or re-arrange their finances so that they don't need financing on a project to project basis.
There are also other sources of capital out there including secondary lenders.
It takes a while for these things to get sorted out and that's why larger multi-family products should be expected to lag other markets.
Rents don't enter into it.
But banks also make money by lending
ReplyDeleteExcept when they don't get their money back.
Rents don't enter into it.
Wow that's always been implicit in your reasoning (or should I say lack of it), but I never expected you to come right out and say it.