The empty condo myth
A recent study by BTAworks shows that the common perception of a large number of empty condos in the downtown core is false (unless you consider thousands of empty condos to be a large number).
There has been much public grumbling over the years, with people blaming foreign-owned, empty condos for contributing to the city’s exceptionally tight housing market. Last fall, when Gregor Robertson was campaigning for the mayor’s job, which he eventually won, he briefly suggested the city should consider a speculator tax on empty condos to force owners to either use them for housing or sell them.
But the research done by urban planner Andrew Yan for BTAworks showed only 5.5 per cent of condos, in a representative sample of 2,400 units in 13 buildings, showed electricity use below 75 Kw a month. That kilowatt usage is considered a threshold indicating a unit is vacant, because it’s an amount so low that it would indicate that only enough power to maintain a refrigerator was used. When the threshold was upped to 100 Kw, it indicated a vacancy rate of 8.5 per cent.
It would seem that a large number of those condos are ‘investor owned’. I wonder how many of them were purchased back when you could actually make money on that investment?
Mr. Yan’s research showed that the vast majority of the condo units are lived in, although at least half are owned by investors and rented out. The statistics from homeowner grants and B.C. Assessment Authority information indicated anywhere from 52 to 61 per cent of downtown condos are investor-owned.
The study also showed that of the investors who rent them out, few were from outside Canada: Eight-seven per cent of the units were owned by investors from Canada and half of those Canadian investors were from the Lower Mainland.
Full article is in the Globe and Mail and wraps up with a point about how recent building and investment styles pose a risk to the local economy.
Mr. Heeney, who is also a member of the Vancouver Economic Development Commission, said the reality of Vancouver’s economy is that it is made up of small-scale entrepreneurs and lacks big head-office-style businesses.
The people who work in those start-ups need the kinds of places to live that they’re not finding, which is inhibiting the city’s economic development, he said.
Update: Andrew Yan of Bing Thom Architects sent in this PDF press release from the study which includes some other findings including this one:
RSS 2.0 comments feed. Both comments and pings are currently closed.A family with one child in the City of Vancouver earning the median income of $75,000 a year would have great difficulty in finding and paying for a condo bigger than one bedroom, even if condo prices were to fall 25 percent below 2008 assessment levels.
May 29th, 2009 at 9:20 am
I cannot believe how small this sample size is….13 units, 2400 in those 13?
That could just be 1 condo building in each major vancouver neighbourhood.
Brutal research.
May 27th, 2009 at 4:09 pm
Any time new research is published, it always helps to find out exactly who paid for the research, and who carried out the research. Obviously they won’t publish the research if it doesn’t somehow help them, instead they can manipulate their data to prove whatever point they’re trying to make.
As for the research methodologies – they say these units used less than 75 Kw a month.. over how many months? Did they just pick a random month or did they take an average? 13 buildings seems like a small sample size IMO – and no mention of whether they were randomly selected, just that they’re a “representative sample”, whatever that can be interpreted as.
There are some units held by international “investors”… true – but some of them do business here and travel back and forth and would like a place to stay when they’re in town.
OT – There was a posting in CL for some guy who is looking for someone to share a mortgage and a life with a woman, sort of a mashup of an MLS listing and a personal ad. I LOL’ed when I read it – house is “worth” 700k (in Langley), previous partner took their 150k equity and left him on the hook for the $450k+ mortgage which he can’t afford on his own with his “6 figure” salary, so he’s looking for a roommate/spouse/investor to share the pain with.
Here it is:
http://vancouver.en.craigslist.....90992.html
May 27th, 2009 at 3:56 pm
observer:
Yes but 100,000 are homeless, so you need to adjust your calculations for that.
May 27th, 2009 at 9:17 am
If there is such a high percentage of investor owned condos, it is possible the sales this spring are simply sales to switch hands between investors and not really something indicates a long term healthy market.
May 26th, 2009 at 10:17 pm
Interesting article. 1/2 of the condos are investor owned sounds interesting since many strata councils only allow 10% to 20% of the entire complex to be rented. So…I guess most of them are illegal? lol
May 26th, 2009 at 4:35 pm
oneangryslav, it’s nice to see that you understand how percentages work. Congratulations!
May 26th, 2009 at 11:08 am
macchiato: So what is the study for, just the downtown core or for Vancouver proper. This needs to be more clearly defined to convert to an absolute number. For instance, it may be that the 18,000 figure which has been circulating was for the city of Vancouver not the downtown core? Also, if the downtown core is just downtown and west end, then using an absolute figure for just this area might give the false impression that there are very few empty condos when in fact the total number in the city of vancouver proper is large.
I still wonder why they couldn’t have just run their program on bc hydro for all units and see what number they get instead of doing such a small sample size (they wanted to get other information, but for the question of estimating the number of empty condos nothing beat getting an absolute figure based on their assumptions on electricity usage thresholds).
May 26th, 2009 at 10:16 am
Rob A.:
If you look at my remark at #25 above, you’ll see that I’ve estimated (given the data available and a conservative assumption) that there could easily be as many as 23,000 empty condos in Vancouver. How does that disprove the bear myth?
Apropos of the whole empty condo issue, has anyone ever seen comparable data for other cities?
May 26th, 2009 at 10:15 am
observer: No, Vancouver proper is something in the 600-700k range for population. I think downtown pennisula might be 100K or so.
May 26th, 2009 at 9:49 am
I seem to remember downtown Vancouver has a population of 500,000 so if there are 150,000 condos that would be about 3.3 people per unit. Is that reasonable?
May 26th, 2009 at 9:46 am
The way I see it, one bear myth and one bull myth were disproved.
Bear myth: lots of empty condos
Bull myth: rich foreign investors (disproved second time by my count)
I think it’s funny that some bears can’t let go of their myth. The are as irrational as the bulls were on the way up, but it just happens that by quinsidence the bears are right this time.
May 26th, 2009 at 6:52 am
S&P: Home prices fall by record 19.1 percent in 1Q
http://finance.yahoo.com/news/.....amp;ccode=
May 26th, 2009 at 6:26 am
Anyone have an idea how many built condos there are in Vancouver now?
May 25th, 2009 at 11:41 pm
observer:
If you look at my conservative estimate of the 95% CI above, and using 150,000 as the total number of apartments in Vancouver, you would get an 95% CI estimate of the number of empty condos that ranges from .014*150,000 to .156*150,000 or 2100 to 23400.
May 25th, 2009 at 11:18 pm
I seem to remember articles a while back suggesting the number was 18,000 and that this was based on data from BC hydro but obviously the intention of this study is meant to put doubt on this.
A couple of points: If the BTAworks (apparently R & D division of architectural firm) had access to BC hydro data, it would have been just as easy to do analyze all condos in Vancouver rather than just a sample of 2,400. Not sure why they didn’t do that.
Also, anyone with access to the data could very easily do a count of the number of units of completions since 1990 versus population growth since 1990. It should be possible to get a sense of the number of empty units from this under reasonable assumptions and taking into account that possibly the units are getting smaller. That would be an obvious way to check their findings for consistency.
Another question is what is the total number of condos in Vancouver. Multiply that by their estimate of 5.5% and it should be possible to make a fair comparison with the 18,000 figure that has been circulating.
The number of empty condos would be a good thing to know. It doesn’t in itself imply anything about the soundness of buying RE under current economic conditions but is one of the many factors.
May 25th, 2009 at 7:53 pm
dirtdevil:
Wheres the money going to come from for new bridges and the proposed millenium line, more delays?
The bond market, of course. Capital projects are “off-budget” and their costs don’t show up in the deficit.
The interest payments do, though. But rates are low so hey, lets borrow and spend.
I’m not knocking this in general – this is OK if the returns from the capital projects are justified (just like borrowing to buy a house is justified if the rental value exceeds interest cost). But that can be a big if.
May 25th, 2009 at 7:40 pm
Rhino:
#19 Rhino, if the BC LIBS are saying 495 million as the deficit may not be ‘on target’, what happens when the Olympic bill of up to 6 billion comes due? How about the recent admissions of 10,000 new couples with children hitting the welfare rolls, what about all the other new welfare claimants, couples without children and single welfare claimants have to be at least double the number of families on welfare based on demographic averages in the population.
The new costs associated with the downturn and the disintigrating revenue from sales taxes from an imploding retail sector and dumpster diving royalty fees in minerals and mining have to show up somewhere. The ‘hard economy’ of this province is in the toilet.
Business start ups are at zero. Traditional buisnesses are preojected further big down years ahead, this includes tourism ( with the death of the cruise ship industry fazing in between now and 2010), mining, gas & oil gutted , forestry gutted, fishing is dead , construction will stop dead with the Olympic projects done. Wheres the money going to come from for new bridges and the proposed millenium line, more delays? it won’t be the first time? More denial coming maybe? Ya think?
May 25th, 2009 at 6:58 pm
A family with one child in the City of Vancouver earning the median income of $75,000 a year would have great difficulty in finding and paying for a condo bigger than one bedroom, even if condo prices were to fall 25 percent below 2008 assessment levels.
Which means of course prices are going to fall a lot more – like 50% or so. As well as price/income, price/rent is giving us the same message.
“By the time we get to Phoenix, I’ll be laughing….
While Michael Campbell keeps telling us to buy….
And the specuvestors will be crying in their lattes….
And Bob Rennie will be asking for big subsidies”
May 25th, 2009 at 6:55 pm
As someone who is well versed in statistics, I thought I’d chime in with both an assessment of the study’s methodology and to correct a few of the misconceptions about statistics revealed in some of the comments here.
First, statistical methodology is extremely powerful and useful, when used correctly. For example, a random sample of as few as 1000 respondents can provide a generally accurate estimate of the true level of support for the president of the USA amongst the entire population. So, the fact that there were only 2400 condos randomly selected should not be problematic. That being said, there is every reason to believe that this study is problematic, as I’ll show below.
First, this is not a typical random sample, in that the 2400 observations come from only 13 buildings. The survey design is what is called a stratified or cluster design. The main difference between a stratified/cluster design and a simple random sample design is that in order to get the same amount of statistical power [I'll explain what this is later], you need a much larger number of respondents in a stratified/cluster design than in a simple random sampling design. This is because, whereas in a simple random sample we can assume that the respondents (in this case condos) are generally independent of each other, the same can not (obviously) be said of the units in a stratified/cluster design.
In this condo study, the units within each of the 13 buildings (which, by the way, is a very low number of “clusters”–if I tried to propose this type of design to a methods committee they would turn it down, demanding that I include at least 30 first-stage cluster components (i.e., buildings in this case)) are similar to one another in many ways. Thus, our “effective sample size”, given that we’ve limited our sample to the condos in only thirteen buildings, is really much smaller than 2400. The actual “effective sample size” can be calculated, if you knew how dependent the condos in each building were to each other. Now, why is “effective sample size” important? Well, because it is one of the components we use to determine how “confident” we are that the results in the sample (i.e., that 8.5% of condos are empty) are equal to the true level of condo emptiness in the population.
We usually express our confidence in our estimates by providing what are called 95% confidence interval estimates, in addition to our best (“point”) estimate, which in this case is 8.5%. So, we want to say something like, “while our best estimate of the percentage of empty condos in Vancouver is 8.5%, we are 95% certain that the actual value is between X% and Y%.
Now, in this case, I’ve done some estimates of the actual confidence interval. Were the sample truly random, then our 95% confidence interval (CI) would be 7.4% and 9.6%. But, but, but, as mentioned earlier, because the 2400 observations come from only 13 buildings, the confidence interval is much larger. Based on very conservative estimates of something called the intra-cluster correlation coefficient, I’ve calculated that the 95% CI for this study is about 1.4% to 15.6%.
May 25th, 2009 at 5:26 pm
“I give Gordo and the boys at most a month before we get the same speech”
How about 3 hours…
http://www.cbc.ca/canada/briti.....ansen.html
May 25th, 2009 at 3:00 pm
Sorry, off topic, but did you see Flaherty comments about deficit … I give Gordo and the boys at most a month before we get the same speech … might wait until school’s out and people are away … but its coming – cue the Jaws music
May 25th, 2009 at 3:00 pm
From Garths Blog today
“Garth, you said, ” If you want a trophy house, just admit it’, or something to that effect. Very astute of you to see through the breeze of rationizations the ‘patient’ was slinging you. Garth one of the reasons people on the west coast are so desperate to own real estate at any cost is deeply sociological. Simply put, they have no other avenue of expression. In Vancouver, for example, there is no culture, no galleries, no theatre, no arts movement, no brilliant historical architecture, no urban scene, no proximity to anything interesting, no intellectual or cafe culture.
If you don’t want to ‘bushwalk’ in Vancouver you are SOL for any other kind of outlet. So, people pretend to have a life by wrapping themselves in ‘things’, by which they express themselves. The pervasive mind numbing advertising is all about determing your femininity or masculinity by how you stack up against the current model of real estate or automobile. In Vancouver you can’t be ’somebody’ unless you conform to a pre-ordained ‘norm’. You see this everywhere, people dressing exactly alike, stores all selling exactly the same thing , driving all the same cars in terms of what is currently being advertised on heavy rotation and coveting real estate because it has overwhelmed your ability to express youself in any other way. My wife and I were fortunate to live in large international cities during various points in our careers and life and living is very differant when living in cities which offer great diversity. You find people who don’t want to own auto’s because they are costly and inconvieniant, lots of people don’t buy real estate for the same reasons and they have too many other things to do with their lives. They have intrests, and they have a lot of disposable capital with which to fund those intrests. Many Europeans for example don’t parade around shopping malls all the time for ‘entertainment’ or join the long lines of traffic driving to a popular place to show off your newest car. The time invested in such boring behaviour is useless time spent pretending when you could be living instead. The advertisers use the locals fear of being alone to great advantage.”
Somebodys got a cynical and unflattering over view of the sheeple in Wahhhh-couver.
May 25th, 2009 at 2:07 pm
anonymous: “So the lies continue, will Vancouverites ever be told the truth?”
Do you think “telling the truth” in this particular instance has any appreciable impact on how the market behaves?
You want the truth, anonymous? It’s Vancouverites who are responsible for the bubble; not developers, rich foreigners, the media, or government. Truth: everybody who signed on the dotted line convinced themselves the prices they paid were justified. Truth: there are thousands of dissenting opinions around, should anyone in the city care to look for them, if they were TRULY interested.
The “lies” spread by the media are just excuses used to validate one’s greedy behaviour. Even if some were to tell “the truth”, they would be ignored in favour of “the lies”.
May 25th, 2009 at 1:55 pm
Interesting that the sample size of 2400 units is roughly the number of new units built in 2008, and about 500 units less than the number set to be finished this year.
Does anyone have an up to date number of condo units in the downtown core? That would put a figure to the percentage range named in this study. Even if we where only at the 2006 number of 150,000 apartments, the ‘low’ estimate of 5.5% vacancy still means more than 7,500 vacant condos in the downtown core.
May 25th, 2009 at 1:54 pm
I have to admit the statistics maybe true. I live in Coal Harbour and a LOT of the units are owned by off-sore owners – mostly China, Hk, and Korea. They just left them empty for years.
Now a lot of them are rented out(maybe they need the money or didn’t calculate the high cost of owning before)
One next door was just bought by a Korean family for their son, because he is going to UBC. They live on the North Shore and thought Coal Harbour is a lot closer than West Vancouver to UBC!
Did I mention he drives a brand new BMW too?
I don’t think they had to worry about the mertics of owning like the rest of us here.
May 25th, 2009 at 1:51 pm
1) Considering most Real Estate pumpers have been claiming vacancy rates below 2% I’d say 8.5 is pretty big. People on here who speculated about the number of empty condos generally spitball in the 10-15% range so we weren’t far off. I don’t understand where “myth” belongs in the title. 8.5% is a lot, if you think about it, if this is a Vancouver wide phenomenon and half of those specuvestors decided to sell it would more than double the number of units on the market in Vancouver. Not to mention that over half of all downtown condos are owned by specuvestors and rented out, many of those people will flee to safer investments when the market psychology tips and people realize we’re at an unsustainable level.
2) The guy who did the study works for an Architecture firm. Does anyone doubt where his bias lies? It seems his numbers are fairly fair but he’s obviously trying to spin them in a pro-Real Estate direction.
May 25th, 2009 at 1:50 pm
A vacancy rate of 5% seems about right. This has been confirmed by those more familiar with Vancouver’s rental market. This article gives more certainty that:
a) Vancouver being filled with pied a terres is a myth
b) Landlords obviously like collecting rents from tenants
May 25th, 2009 at 1:25 pm
13 Buildings sample with 2,400 units.
You have got to be kidding. First of all were these buildings randomly selected throughout the city, or just bunched in one of the well inhabited areas? Furthermore, there are at least 150,000 apartments (you can verify this here for the 2006 city facts pdf, http://vancouver.ca/commsvcs/c.....facts.pdf), the sample size was only 2,400 units, with huge number of condo development that has occurred since 2006, this represents less than 1.5%, perhaps even less than 1% of a sample size. This is what you call a joke! This article in the Globe and Mail by Frances Bula, and the study done by Andrew Yan for BTAworks, should never have been published. This is just more spin and more lies from the real estate industry and their supporting cronies.
You can’t seriously believe BTAWorks would do an honest appraisal. Heaven forbid if they did a proper study and found out that a sizable number of condos are really empty.
Bad data = bad conclusions. Bad journalism = distorting the public. Badly implemented studies = Lies to prop up your agenda.
SHAME ON YOU FRANCES BULA, ANDREW YAN and BTAWORKS! SHAME! SHAME! SHAME! SHAME ON YOU GLOBE AND MAIL; What ever happened to checking your facts before publishing.
So the lies continue, will Vancouverites ever be told the truth? Who can we trust? Not the newspapers. Not the realtors. Not even the government since, they are now on the hook for things like the Olympic fiasco.
What is everyone trying to hide! Are things really that bad? It is so easy to get to the honest truth, but no one is willing to give out the real stats.
Stay tuned ladies and gentlemen, after the Olympics, Vancouver is going to do a Phoenix! (for those not in the know, Phoenix, Az, real estate down 52% and dropping) But this time it will not be rising out of the ashes, but burning in them!
Yes everybody holding onto real estate, are holding their collective breath and saying, “The Olympics will save us!” BWAHAHAHAHAHAHAHAHA!!!!
May 25th, 2009 at 1:15 pm
“The study also showed that of the investors who rent them out, few were from outside Canada: Eight-seven per cent of the units were owned by investors from Canada and half of those Canadian investors were from the Lower Mainland.”
…Sort of blows a hole in Rennie’s recent argument that the downtown is being bought up by the Iranians and the Chinese…
May 25th, 2009 at 1:11 pm
The ‘planner’ has taken simplistic data and produced a student quality result.
Well said, realpaul.
But the research done by urban planner Andrew Yan for BTAworks showed only 5.5 per cent of condos
Only 5.5? Why not just say the number without attributing an arbitrary interpretation. Is it possible that 5.5% is actually a “big number”? I don’t know, so here’s a question: if these were immediately made available for rentals, by what percentage or factor would this increase the available rental stock? Or, if they were immediately made available for sale, by what percentage would this increase condo inventory for sale.
May 25th, 2009 at 12:26 pm
Anonymous:
As has been discussed on this board many times, the official vacancy rate covers only multi-unit rentals. We all know that the vacancy rate for condos is much higher, the question is just how much higher.
May 25th, 2009 at 12:19 pm
Two points from the article.
“in a representative sample of 2,400 units in 13 buildings, ”
13 buildings surveyed doesn’t seem to be that great of a sample, but then..
“When the threshold was upped to 100 Kw, it indicated a vacancy rate of 8.5 per cent.”
Excuse me? a vacancy rate of 8.5% whats the official vacancy rate again? 0.0000002 or something?
May 25th, 2009 at 12:08 pm
I have no problem with foreigners (or locals) subsidizing our rental stock … if they want to piss money away buying assets with -ve ROE that’s their problem … I suspect they will slowly figure it out and that will be reflected with increased supply and lower prices.
May 25th, 2009 at 11:54 am
Sorry that should read $1500 per sq ft as we have seen in recent SRO renos.
May 25th, 2009 at 11:53 am
Container Homes designed an sold in Australia. great idea for Canada/ Certainly would a solution for low cost housing if you get past the union lobby building at 41500 oer sq ft as we have seen in recent SRO renos and the tightly held land stock sold off to developers. lets face it, we are NOT running out of land. We have a political regime which has refused to rezone publicly owned lands for residential use until bribed by developers.
http://images.google.com/imgre.....container+
May 25th, 2009 at 11:42 am
That’s creating a downtown that has little room for families, except those willing to squeeze into small places.
You haven’t had any significant number of families living downtown for generations. There was only one high school and one elementary school for as long as I can remember. I don’t recall anyone complaining about it in the 1970′s.
The reason why you don’t have families downtown is obvious. The area is attractive to singles and childless couples so they outbid families. That’s no more a problem than the fact that there aren’t many singles in Langley.
“If this city is serious about wanting to progress, it needs to provide market housing for families.”
Isn’t that an oxymoron? It’s not market housing if the city provides it.
Can you say “subsidies to developers”? I guess that’s a bit too blunt for Mr. Heeney.
May 25th, 2009 at 11:40 am
I have met a lot of new Canadians who have not habituated to BC Hydros ‘averages’. Gas stoves are preferred over electric and people dress warmly with quilted clothing rather than turn the heat up. The ‘planner’ has taken simplistic data and produced a student quality result. My first question is ‘who funded the study’, in Vancouver , real estate data is all about lies, we all know that.
Meanwhile, the Vanc Sun reports that commuter stats are up because ‘people are committed to transit’ again, who’s making this shit up? The fact is that many households are losing their second incomes to unemployment and the second car or the insurance and gas costs on the primary vehicle are no longer affordable.
The spin doctors are at it gain, what BS.
May 25th, 2009 at 11:04 am
I’d love to see an actual histogram of usage to get an idea of how sensitive the results are to where you put that occupied/unoccupied line.
Another idea: My family’s hydro use seems to range between 135Kw/mo and 210Kw/mo depending on season, so probably they could raise the threshold and take the highest consuming month over a period of time. Unoccupied suites would have very consistent usage, I would assume.