City
'Empty Condo' Phenomenon a Myth
If you've seen the film Everything's Gone Green you know what the 'empty condo' phenomenon is. Wealthy, overseas buyers snap up Vancouver condos, only to let them sit vacant for years. An entire city of tall buildings sitting virtually empty.
Well, a new study from BTAworks, a research and development division of Bing Thom Architects, suggests that it's just a big urban myth.
You can find the full study in schwanky pdf format here.
Some interesting notes:
BTAworks...examined data from the City of Vancouver, BC Assessment, BC Hydro, and the Canadian Mortgage and Housing Corporation for 2,400 condos in Downtown Vancouver - almost 10 percent of all the condos in the area.
Only 5.5 to 8 percent of study condos were unoccupied.
Condo ownership is a relatively new form of housing for Vancouver. Over 88 percent of condo units in Downtown Vancouver have been built since 1990.
Less than 40 percent of downtown condos have more than one bedroom.
The majority of condos are not occupied by the property owner.
The majority of non-owner occupied condos are owned by BC residents, with a scattering of foreign owners, predominately from the western US states such as California, Washington, and Arizona.
Owner-occupied units are typically worth $30,000 to $40,000 more than non-owner occupied units, and the more bedrooms the unit has, the more likely it is to be owner occupied.
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.
While much of the study provides what I like to term 'duh' statistics, it is interesting not so much that the empty condo myth has been falsified to some extent, but rather, why it began in the first place. Did China's takeover of Hong-Kong and the subsequent exodus prompt mass racism/classism in the form of such urban myths? I really have no idea, but check out the study and post all your problems with it below.
(Photo by Uncle Buddha in the BR Flickr Pool)
Discussion
13 Comments
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Isn't that an office building you pictured?
Indeed it is.
Very interesting. I've heard time and time again that housing prices have skyrocketed due to absentee Hong Kong landlords. If that's not the case, who can we scapegoat now instead?
Josh: Things that can't really be scapegoated (high labour and material costs for construction), and NIMBYs.
Gonna zone for buildings much lower and less dense than demand would justify (most of Vancouver is still zoned for single family housing)? Enforce weird building code rules like the one that forbids any housing unit under 400 square feet? Have neighbourhood associations that bitch and moan about any new development (see Chinatown, the west side, and even the West End if it involves any loss of rental housing)? Offload social services onto developers (via "social housing")? Value view cones over functionality? Enforce aesthetic standards via the Urban Design Panel (obviously more expensive buildings will be able to get through this more easily)?
It should be impossible to pretend that none of this comes at a cost, but that doesn't stop a lot of people from trying.
I've looked at the analysis (given what data are publicly available) and it has some important drawbacks that call into question the author's findinds. See here: http://vancouvercondo.info/2009/05/the-empty-condo-myth.html#comment-47786
In addition, why does Vancouver have the highest housing costs in the world right now? Three words: real estate bubble. It's popping just like it has in every single other city in the world.
Josh,
You can always scapegoat the speculators. The people who bought "investment" condos who are now renting them out because they are worth less than what they paid for them. The study says more than half of downtown condos are not occupied by the owner so they are now renting them hoping for a recovery. Since they are paying more for the mortgage, strata and property tax than they are getting for rent the owner won't last long and will have to sell at a loss. Just wait 2 years and real estate prices will be much closer to normal limits.
didn't BC Hydro claim 18,000 condos were empty in April 2008 because they showed they used just enough power per month to run a fridge and nothing else?
666 Burrard in fact
itis:
Isn't that an office building you pictured?
So a condo designer is trying to convince us that the empty condo phenomenon is a myth? Sounds pretty fishy to me. After all, IF it is a myth, wouldn't the implication be that more condos are needed, and that council should approve more zoning applications to build more condos. And wouldn't mean more business for BTA?
This study sounds pretty biased and self-serving to me.
Someguy:
Haven't you noticed EVERY real estate 'expert' that tells us "there is no bubble - hurry up & buy now or be priced out forever!" ... "Ok, there's a drop in housing prices - buy now!" ... "prices are now recovering - buy now!" ... ever bit of it is self-serving, from the real estate board directors to CMHC to the marketing companies (the news gets Rennie's perspective?!?) ... it's one of the only industries that exist that completely directs it's own market.
Some terrible flaws in this research. First, most vacant condos are fully furnished including computers tvs etc.. that ar eplugged in and draw current, they also have climate control systems left on. This will push the power consumption up and is only a negligible cost to the owners. Second, most of the foreign owned vacant condos are in buildings with no-rental policies that were clearly not part of the make-up this small survey. The survey is actually rather ridiculous in its claims. But lastly, the most overstated myth here is more a misconception from both sides of this arguement. It doesn't matter if it is foreign or local ownership, what matters is that when property is bought up t rent out, welath is taken out of the economy. Transfer of wealth taht does not arise from actual work kills an economy. PRoperty rental has always been seen as 'free money' by those who can achieve enough wealth to start investing in and renting property. But it sucks money from working people and propogates a transfer of welath not based on actual work. The more people who become involved in this, the more skewed an economy becomes. The end result is what is happening in VAncouver, a market where property ownership has become unattainable for an average working Vancouver family despite an abundance of available property. And the only fix is a rather unpalpable tax on non-primary residences. But Vancouver has yet to find someone with the stones to pull that off.
Re: a tax on non-primary residences. I think we may be near a point where the majority of voters would be all for that tax. It must be a small minority who can actually afford to own a secondary residence, given that most of us can't afford even one.
A non-primary residence tax already exists in the form of capital gains. When you sell a non-primary residence you pay tax on the full profit you made on the property.
Could Vancouver implement a two-tier property tax with different rates for non-primary residence? Arguably. Define a rental property as a business and tax it at the corporate rate.
Of course that might just increase the cost to rent as owners of these now commercial properties just pass the cost along.