The Statcan quarterly population report is released today. Get your pdf here. This is always covered breathlessly in the local media, picking out data points that confirm the well-known fact that not only does everyone WANT to live here, they actually ARE moving here. Beyond confirming our own natural attractiveness, it also apparently provides some justification for our rising house prices.
First, net migrants from other provinces is barely over zero. In fact, we have just barely gained back what was lost from 1998-2003. In TOTAL since Q1 1998, we are up a net 6,118 bodies from interprovincial migration.
Next, immigration. Immigration is doing fine. We are at the same level in terms of number of bodies that we reached in the mid 1990s. As a percent of population, it is lower than the mid-90s.
Combine these together and throw the natural growth (births - deaths) into the mix and you get total pop growth. Here it is. For new bodies, we have a cyclical peak in the late 90s, but lower than previous cyclical peaks. As a percent of population, however, this cyclical peak was around half of previous peaks--and lower than previous troughs!
How remarkable the 2000s were for population growth can be made clear by ranking the 5-year periods from 1960 to 2009 by population growth. 2000-04 and 2005-2009 were dead last. So much for the population boom.
I think that a total population increase of 1.6% per year in BC is nothing to sneeze at.
Moreover, metro Vancouver is receiving young migrants from the rest of the province. Likely to see strong household formation (fewer people per household) from young and senior migrants. Some analysts looking at 16k new households per year.
“British Columbia’s population grew by 16,600, or 0.37%, to just over 4,510,900. It was the third consecutive quarter in which British Columbia led all provinces in population growth rate. Three quarters of the increase was attributable to net international migration gains of 12,300 in the first quarter of 2010... British Columbia also ranked first in net interprovincial migration for a third consecutive quarter, with a gain of 1,600. Nearly half of British Columbia’s total in-migrants from other provinces in the first quarter of 2010 (13,900) were from Alberta (6,600), and a quarter of them were from Ontario (3,900).”
Moreover, the inflow and outflow of provincial migration is unequal in quality. The average retiree (inflow) brings more equity with them than the equity taken out by the outflow. Moreover, I suspect that the inflow of the 25-45 age growth brings higher income potential than the outflow. That is, higher income moving to the more expensive location.
I can't decide if it makes sense to do population growth in percentage of total population or not.
If we were to see population increase at a steady percentage forever then population would go parabolic. It is probably more reasonable that is would go asymptotic as it would get harder and find areas that people could and want to live in.
I guess it really depends on how dwellings use land. If you can get twice as many people on the same amount of land, then population could increase very quickly.
It would probably be interesting to compare % population growth of the GVRD to the % population growth of Canada and the world.
Because eventually, the population of all of those places will reach a peak as they cannot support anymore people.
Metro Vancouver at 2,877 sq km is almost twice the size of Greater London at 1,572 sq km. And London is not densely populated by European standards.
Granted Metro Vancouver has a higher % of unbuildable area, but it's not a densely populated metro by global standards, at all. And it's not short of land.
And the proof of that is that you can rent land, e.g a SFH or a parking spot, cheaply.
Thanks for the stats update VHB.
There is no shortage of land in greater vancouver at all even within the city of vancouver there is plenty of underutilized land available to house hordes of people.
Population growth is not a major concern in greater vancouver and is not the reason for house prices increasing as rapidly as they have. If population growth were a major cause of house price increase, we would see upward price pressure on rents too, which we don't.
The main reason why house prices have gone up is because it is cheap and easy to borrow money and leverage real estate to obscene levels. The normal market mechanisms to prevent this type of lending do not exist in Canada because of the CMHC's blanket guarantee on high ratio financing for lenders.
Moreover, I suspect JimTan is an idiot...
To account for changing population, we should adjust house sales and other like data as a % of population. I would also tend to use housing starts as a % of population growth, as we want to compare derivatives to derivatives, or dapples/dt to dapples/dt.
The growth rate, even if geometric, is low enough to use a linear approximation.
As mohican has said -- and what is absolutely key to understanding what is going on -- rents are not increasing significantly therefore there is no housing shortage.
"That is, higher income moving to the more expensive location."
People don't bring income with them, either the jobs are here or they aren't. If your argument were correct we should see incomes increasing along with house prices. Rather than suspecting this type of thing you can actually look up the statistics. In actual fact, house prices are out of line with incomes.
“There is no shortage of land in greater vancouver at all even within the city of vancouver there is plenty of underutilized land available to house hordes of people... The main reason why house prices have gone up is because it is cheap and easy to borrow money and leverage real estate to obscene levels.”
Sorry Mohican. This doesn't make sense. There should be a huge increase in new housing if prices are at an obscene level and there is plenty of land. This is basic market economics.
Calgary is an example where the RE peaked before the economy. Today, rental vacancy is 5.5% vs. 2.2% in metro Vancouver. And, prices have not recovered to peak levels despite the same interest rates as Vancouver.
The "new starts/completions per additional resident" that VHB has used is one of the best metrics to predict future housing over/under supply. IIRC this number has been roughly balanced in recent years.
There was some thought a building dearth in the late '90s and early 2000s was simply being recouped during the building boom but logically that's impossible: starts must always lead population growth because residents need to live somewhere. That is, available dwellings can never drop below that required to service the existing population, therefore the building excesses of the mid-2000s must be worked off in subsequent years.
We have confirmed this to be true, given the amount of inventory currently and soon to be available in BC. Given:
1) the length and magnitude of the building boom;
2) the elevated rate renovations of existing units not counted as starts; and
3) that starts have on average remained on par with high population growth in the past 3 years;
it will be some years to work off the housing oversupply, even with above average population growth.
Moreover, I took a look at the latest CMHC rental data on existing two-bedroom apartments. Calgary is down 6.4% vs. +2.9% for Vancouver.
Do your research and think critically.
JimTan, landowners aren't idiots. Building costs are well defined and so is market price of sales. Land is not being given away for free because if it were we'd be seeing way more building than we are. I think the point is there is no shortage of land for the next 100-200 years at least, at current growth rates.
CMHC data are not a good gauge of rental vacancies or rental rate increases for the market at large. CMHC cites their inability to properly track the vast majority of the small-time rental market suites as one of the major systematic risks in their data analysis. But you already read their analysis I'm sure.
"I think the point is there is no shortage of land for the next 100-200 years at least, at current growth rates."
I'm sure that you are absolutely right!!!
JT - if land were priced at a level at which developers could turn a profit by developing it, they would build more.
Land prices are high so new home construction is restricted. Developers will only build as much as they believe they can sell at a given price with a given profit margin. If land prices came down and everything else remained the same, they would build much more than they do now.
If you take a trip out to the fraser valley you will see the current building boom. This is because land is much cheaper and the margins for developers are very high without much of the risk that comes with developing within the COV.
The houses are being built, they just aren't within your line of sight - they are in mine - literally.
"Calgary is down 6.4% vs. +2.9% for Vancouver.
Do your research and think critically. "
Calgary, like most of alberta has and economy that depends on oil prices. Oil prices are down from a few years ago. When oil prices are high, skilled workers can make money by the bucket if they are willing to work 15 hour days. This attracts tons of young people to come work for a while and earn said buckets of money.
Obviously they rent because they dont plan to permanently move to Alberta. When the buckets of money arent as easy to come by, they leave. (sometimes with a drug addiction, but thats another story)
Ta da, I give you the reason for Calgary's falling rental market.
How do I know this, I know a fair amount of people who were lured by the buckets of money. Most of them have returned.
Please Jim, try to think critically.
How does Vancouver compare to Toronto or Ottawa in the terms you just set out?
Land owners are affected by the same speculative expectations as investors in developed properties. If they see prices continuing to rise, they think they will get a bigger return on their land by selling it later rather than sooner. This is particularly true for unsophisticated small holders. Thus high prices do not necessarily mean more land will be released for development by owners.
Once the speculative treadmill is broken and land owners see flat or declining prices, they become a lot more eager to sell. Some US markets have seen a 90% collapse in land prices.
“Calgary, like most of alberta has and economy that depends on oil prices.”
Actually, David, Check the numbers. According to Stats Can, April unemployment rate for Alberta is 7.4% vs. 7.3% for B.C.
Since the rate is the same, does that blow your theory out of the water? That is, the demand for rentals is not so much worse in Calgary?
Like I said, Calgary's RE peaked long before oil prices peaked in 2009. That is the clearest sign of OVERSUPPLY!
Do your research and think critically.
"Some US markets have seen a 90% collapse in land prices."
Which US markets?
How are they different from US markets that have not collapsed 90%?
Like I said, Calgary's RE peaked long before oil prices peaked in 2009
In fact Calgary RE reached its peak in summer 2007, and oil reached its all time high of $147.27 on July 11, 2008.
RE prices in Calgary starting falling for the same reason as everywhere else - they were out of proportion to rents and incomes.
After a drop of about 20%. Calgary RE prices starting rising in early 2009 (for the same reason as in Vancouver - much lower interest rates) but have not got back to the peak level. And they will resume their decline soon IMHO - they are still much too high.
Heres some research (which has already been pointed out)
"Oil price has undergone a significant decrease since the record peak of US$145 it reached in July 2008. On December 23, 2008, WTI crude oil spot price fell to US$30.28 a barrel"
Also, I wasnt saying that Calgary had higher unemployment, I said it wasnt as easy to make buckets of money. I personally know 7 people that went to alberta for work over the past 5 years. They said you could basically work as much overtime as you wanted, but not anymore.
The jobs are still there, the overtime isnt. The whole reason people go to Alberta for work is to earn lots of money fast. You cant do that working a 40 hour week. That is why people have been leaving. That is 1 reason (I think the main reason) rentals have been falling.
"The jobs are still there, the overtime isnt. The whole reason people go to Alberta for work is to earn lots of money fast. You cant do that working a 40 hour week. That is why people have been leaving. That is 1 reason (I think the main reason) rentals have been falling."
Actually, David, was Alberta losing that many people?
I'm looking at Stats Can Demography report for Q1 2010. Alberta (Table 2-10) lost only net 5k people in the second half 2009 to other provinces. There was a small GAIN in Q1 2010!
Add international immigrants and natural increase, Alberta had a population growth of 1.6% in the last four quarters. Can the oil patch be the cause of falling rent?
Of course, your anecdotal evidence is also very compelling.
"In fact Calgary RE reached its peak in summer 2007, and oil reached its all time high of $147.27 on July 11, 2008."
Excellent!!! So, RE turned a year before oil prices!
But, Vancouver RE peaked in 2008 after the recession started. So, could it be because of differences in the supply situation?
Same as for American markets that dropped a lot and those that dropped a little?
Wait, first we were talking about rentals and now we are talking about real estate. Please try to keep it consistent.
When did rentals peak? Also, how does Vancouver compare to Toronto or Ottawa in the way you compared us to Calgary?
OK Jim I did some research and found this: the Spring 2010 Rental Market Stats. Put out by the CMHC. Also the April report from 2008.
Lets check some things out.
Vacancy rates. (2007, 2008, 2009, 2010)
Toronto: 4.0% 2.8% 2.4% 2.7%
Ottawa: 2.2% 2.2% 2.7% 2.4%
Calgary: 0.5% 2.0% 4.3% 5.3%
Vancouver: 0.9% 0.9% 1.9% 2.2%
Calgary sure took off from 4 years ago. The others, not so much. The takeoff did start in 2007, but in 2008 vacancy was still 2%, which is quite low. This doesnt prove my theory, but it doesnt hurt.
"[Calgary] prices have not recovered to peak levels despite the same interest rates as Vancouver."
You know what else hasnt recovered to its previous peak? Oil!
Just admit you cherry picked Calgary to compare to Vancouver. Toronto and Ottawa have had similar vancancy rates as Vancouver. If you want to show that Vancouve is different compare it to more than 1 city.
I agree with david. Calgary is not an entirely fair comparison.
I think Alberta has been a weaker market partly due to an unwinding of a more extreme situation during the boom compare to Vancouver. Migration was higher, price appreciation was 50% in 2006, less regulation meant more rentals were turned into condo conversions, huge amounts of construction, etc. When these conditions changed or even reversed the impact was more severe here.
"Just admit you cherry picked Calgary to compare to Vancouver. Toronto and Ottawa have had similar vancancy rates as Vancouver. If you want to show that Vancouve is different compare it to more than 1 city."
I don't cherry pick. I tell the truth.
Calgary is the compelling case of oversupply. Once oversupply shows up in the resale RE market, it works its way through to the rental market (as your figures show) because some owners rent instead of sell. We've seen that in Vancouver.
Anyway, in the last year Calgary's vacancy rate only rose 1% (from 4.3% to 5.3%) but rent fell 6.4%. Looks like a weak market.
The key issue is whether there was a loss of population as you have implied. The demographic data shows that population rose in Alberta by 1.6%, instead of falling. So, the demand is still intact.
Unless, you're suggesting that lots of folks moved home for a free room. But, this has nothing to do with the migrant oil workers that you said were leaving!
FYI, Ontario has a population growth of only 1.1% and an unemployment rate of 8.8%. That's worse than Alberta. Yet, Toronto has a falling vacancy rate to only 2.7% (2007 was 4%?).
The rent increase for existing 2-bedroom apartments was just 1% compared to Vancouver 2.9%. But. Toronto still looks great compared to Calgary. Why?
The reason Calgary has had population growth and falling rents is because rental demand is weak. Less than 30% of the population rents. I said the people lured there by easy money rent, now some have left. This is why rent is falling and RE isnt fairing so bad. The temporary residents left, but the permanent residents are still there. There are still jobs, they just dont have the option of crazy overtime like they used to.
The percentage of people who go to Alberta for the easy money is low. Probably less than 1% of total population. But these people have an effect on the rental market.
And Toronto looks good compared to Calgary because Calgary is tanking.
If we are going to split hairs then Vancouver looks like it is trending worse than toronto or ottawa. Those places saw vacancy stay about constant while ours rose from 0.9% to 2.2%.
Granted we are just catching up, but if this trend continues (not saying it will or wont) then things arent looking too good for the market in Vancouver. Time will tell I suppose.
Pay somebody back in his own coin.....................................................................
"If we are going to split hairs then Vancouver looks like it is trending worse than toronto or ottawa. Those places saw vacancy stay about constant while ours rose from 0.9% to 2.2%."
I'm sure that you will absolutely right!!!!
BTW, what happened to VHB? I still want to know about the places with land 90% off!!!!
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