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:

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.

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Nero
Nero
11 years ago

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.

John
John
11 years ago

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… Read more »

John
John
11 years ago

observer:

Yes but 100,000 are homeless, so you need to adjust your calculations for that.

observer
observer
11 years ago

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.

Vic
Vic
11 years ago

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

Rob A.
Rob A.
11 years ago

oneangryslav, it's nice to see that you understand how percentages work. Congratulations!

observer
observer
11 years ago

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… Read more »

oneangryslav
oneangryslav
11 years ago

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?

macchiato
macchiato
11 years ago

observer: No, Vancouver proper is something in the 600-700k range for population. I think downtown pennisula might be 100K or so.

observer
observer
11 years ago

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?

Rob A.
Rob A.
11 years ago

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.

Hovering
Hovering
11 years ago

S&P: Home prices fall by record 19.1 percent in 1Q

http://finance.yahoo.com/news/SampP-Home-prices-f

Bizznitch
Bizznitch
11 years ago

Anyone have an idea how many built condos there are in Vancouver now?

oneangryslav
oneangryslav
11 years ago

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.

observer
observer
11 years ago

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… Read more »

patriotz
11 years ago

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.

dirtdevil
dirtdevil
11 years ago

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… Read more »

patriotz
11 years ago

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"

🙂

oneangryslav
oneangryslav
11 years ago

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… Read more »

Rhino
Rhino
11 years ago

"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/british-columbia/story/2

cashisking
cashisking
11 years ago

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

Denialisrampant
Denialisrampant
11 years ago

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… Read more »

jesse
11 years ago

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".

Mold city
11 years ago

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.

Frank
Frank
11 years ago

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.