experts: real estate column Wednesday, February 08, 2006

Prices Up, Yes; But What About Affordability?

All other 'reports' aside, supply and demand are the most reliable determinants of value.

By Alan  Skinner

My Update headline a year ago read Could 2005 possibly outdo last year [‘04]? Well did it? – you ask. I'll respond with reference to the average price changes for 03/04 and 04/05 - year over year. All N/Van again showed double digit increases but 2 – 5% lesser growth than the prior year. In W/Van almost all category increases were more modest (read less than half as much as the prior year. The only real abnormality here is in townhomes (remember a relatively small number can distort averages) at 38% over 04/05 vs 17% over 03/04. This oddity is attributable to high demand for townhomes and the construction and sale of more "upper end" townhomes to meet that demand. So, to answer the "outdo" question, we could say, "it didn’t outdo – but it certainly continued to do!"

A concept receiving much media (and societal) attention of late is that of affordability. This is clearly an important concept (especially for those of us with offspring). The Vancouver Sun headlined a study originating in New Zealand and put out under the name of Demographia International, which labeled Vancouver as "severely unaffordable". The co-author, a Hugh Pavletich of Pavletich Properties Limited said in an interview from New Zealand that Vancouver’s affordability index was "bloody absurd" (as quoted verbatim from the Sun article). After reading the article, I visited the website and read the full report. I have some serious misgivings with the conclusions of the authors, their motivation and what I see as a somewhat non academic methodology. The report is rife with the use of "house", implying single detached (rather than "home" denoting detached and condo). Their Vancouver "analysis" seems to refer to detached houses, but does not clarify if this is the City of Vancouver or Greater Vancouver or in fact "metro" Vancouver (including the Fraser Valley). On motivation, it implies that their consultancy role includes assisting groups "lobbying" for a reduction in what they refer to as "excessive land use regulation". I won’t belabour the point but I continue to regard "supply and demand" as the most reliable determinants of value. This, I think, is underscored by the impression I gained that the "affordable" list of cities and the "unaffordable" list could just as easily have been headed up – "places where less people want to live" and "places where more people want to live", respectively. Funny that! Remember, always question a writer’s motivation and initial assumptions (yes, mine too).

Now, the "skinny" 2006 YTD figures (read Jan ’06 vs Jan ’05). Number of N/Van detached sales exceeded last year by 30%. Average prices +23% and inventory 23% lower than last year. On the attached (t/hse) front, sales numbers up 28% while Jan apt sales were down (54 vs 71). Average prices up 23% (t/hse) and seemingly unchanged for apartments. This is an anomaly caused by fewer sales in one month – apt prices are up and the next few months stats will evidence this. Inventories lower at -23% (t/hse) and -39% (apt). Demand (buyers) seems strong with inventory markedly below ’05 in all segments.

W/Van detached increased in number of sales 36 vs 23; average price +48% Jan over Jan and inventory stands at 18% lower than 2005. On the condo side for 2005 – attached (t/hses) saw 5 vs 1 units sold; average price change consequently not meaningful. Active listings now 20 compared with last year’s at 43 units. Apartments reflected 5 sold vs. 8 in ‘05 ; with average prices up 13% and active listings at 81 vs. 53 (2005) still a result of the new building activity. Both jurisdictions scoring an "ouch" on inventory!

A little prognosticating (all right – "crystal balling"). Remember that here I do not pretend to analyze or opine on any location other than our North Shore. I am generally of the opinion that both components (North and West/V) will climb in average value – likely in the 5 – 10% range. A gentler curve will start to appear (i.e. tending towards a plateau, but not a horizontal line). More as the year progresses.

Remember that is the place to visit for North Shore R/E information. This work in progress strives to be the "go to" site for North Shore Real Estate analysis. A jumping off point for FULL market listing information, it also offers a "no obligation" estimate of value for your personal Real Estate. Please use it and continue your valuable feedback.

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Any questions regarding the market, decisions, contemplations, opinions of my musings, are welcomed via e-mail (or phone) - hey, pop-in and say "Hi" to me at an open house - I'd love to see you.

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Recent Articles by this columnist:

Keeping Realtors Honest
Tuesday, August 12, 2014

How well do we stack up?
Tuesday, July 29, 2014

Resistance to change and compliance delay
Wednesday, June 04, 2014

Of urban planning and municipal wisdom
Thursday, April 17, 2014

Yes, it's official - demand is rising
Tuesday, March 11, 2014

All articles by Alan  Skinner

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Alan Skinner

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Could 2005 Possibly Outdo Last Year?

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