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The Landcor Report - The Incredible Shinking Condo

September 2013

THE INCREDIBLE SHRINKING MANSE

September 2013

Candy Bars, Metro Vancouver Condos, the Ultimate Vanishing Point

Landcor Data Corporation deals in logical, methodical precision: datum sequences, algorithms, sine functions, regression, statistical analysis; our research tools and talents ceaselessly tracking the flow and ebb of real-estate markets, forecasting, seeking the ‘tells’ beneath the streams of raw numbers.

expensive and at 35 grams (1.23 ounces) on average, John Cleese wafer thin.

Our tireless 24/7 computer banks run on hydro power, Landcor humans make do with at-desk snacking and slurping; cheap cookies, candy, econo-coffee.

Now consider the staple product of the Metro Vancouver developer, the ubiquitous one-bedroom condo.

Between the caffeine and sugar highs, someone had an interesting thought (which happens occasionally): Is there any correlation between mass-produced chocolate bars and mass-produced Metro Vancouver real estate, condominiums of one, two and three bedrooms? Set the parameters, plot the trend lines, the results. . . most interesting. The figures and logic are irrefutable. Dodos, Tasmanian tigers, passenger pigeons, Socreds . . . and the fabulously appointed finished area of the newly constructed onebedroom Metro Vancouver condo. It too is doomed to extinction. Not immediately but inevitably. As the Lower Mainland steadily congests, construction and land acquisition costs rising, the squeeze has positioned the onebedroom as the natural ‘starter home’ but that won’t -- and can’t -- last. Mark your (non-Mayan) calendar: the year 2160 and DOA.

Chocolate Meets Condo Prior to 1947 the ‘regulation’ chocolate bar in Canada cost five cents and was a real mouthful of real chocolate, 3.5 imperial ounces. (Back then, ‘grams’ was your mum’s mum and ‘kilograms’ was something a heavily accented, granny-hating mob boss might order.) But post-war coco prices rose and manufacturers upped the price to a shocking eight cents. Nation wide, children boycotted the pricy bars during ‘The Five-Cent War’ and sales fell by 80 percent but manufacturers hung tough and set the precedent of ever-rising prices and/or shrinking weight. To help disguise the obvious, the product was ‘enhanced’ with exotic fillers; jelly, peanut butter, puffed rice, literal puffery (e.g. ‘bubble’ chocolate) to offer more ‘choice’ . . . and less chocolate. Or simply ditch the charade and voila, the perverse ‘chocolaty’ bar. Today the average ‘chocolate’ bar costs about a dollar and weighs about 42 to 45 grams (1.48 to 1.58 ounces). Real chocolate? More Learn more about the data services that we offer

Yesterday versus today: two thirds smaller at 20 times the price. Tomorrow? No doubt more of the same, meaning less of the same - costing more.

We took 1975 as the start point, ran the past and current numbers for new construction – average square footage, average price per -- to set the trend line. We did the same for two- and three-bedroom units. BTW, we define any ‘bedroom’ condo as having an interior door to separate the sleeping area(s) from the rest of the unit. Thus, we excluded ‘junior one bedrooms’ units a.k.a “Here’s a dwarf/ half wall/open nook to separate the sleeping space from everything else; let’s hope you don’t snore or engage in other noisy mattress activities when your parents are visiting.” Ditto for ‘micro’ apartments and live/work lofts which, with respect to the marketers and blurb wizards, we regard as comparatively large SRO (single-room occupancy) units but ‘enhanced’ with a neato bog and nice appliances in the corners, perhaps a Murphy bed slotted in the wall and far less interesting neighbours. Decades of data old and new danced on the drives, filed through our filters (3 Sigma of course) and boldly extrapolated into the future. The results are interesting.

Size wise, our shrinking chocolate bar theory didn’t hold for twoand three-bedroom units. Although the double-bed units bulked up in the mid 1980s, peaking at almost 1,150 square feet by 1989 before quickly falling back to the pre-peak norm of around 950 square feet, and then spiking again, the projected trend line is that in 40 years the two-bedroom unit will stabilize at around 882 square feet and will stay there, even when projected to the year 3013. (The Thousand Year Realty Company? Go eat your liver, Adolph.)

“In about six generations, the brand-new one-bedroom condo in Metro Vancouver will be, for all practical purposes, never more”

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The Landcor Report - The Incredible Shinking Condo

The three-bedroom trend line is far more variable (‘up and down weird’ muttered our senior data analyst) but it too finally succumbed to SQL and Sigma and will, according to our projections, hover at 1,200 to 1,300 square feet for time immemorial . . . barring the unquantifiable effects of known and unknown outside forces. (See below: Caveats, Qualifiers: Landcor Boldly Predict.)

Go Ask Alice Back in 1975 and when the ‘buy an apartment?’ concept was viewed with skepticism and the word ‘condominium’ was the subject of rude puns, the average new one-bedroom unit was 705 square feet, invariably frame built and relatively rare. In 1976 the new one-bed condo abruptly slimmed down to around 660 square feet, sold for less than $60 a square foot and size-wise stood pat for the next decade. In the mid-1980s the concrete towers began to rise in Metro Vancouver and developers went into full courting mode, eager to win converts and sales contracts; the average one-unit regained ground, swelling up to around 730 to 750 or so spacious square feet. In the mid-1990s, square footage began to reverse, the trend line accelerating and solidifying as the millennium turned, construction and land costs rose and developers took back ‘lost’ ground to fit more units into the blueprints. Price per square foot: almost quadruple the 1975 comparable. Call it our opinion but as the population in Metro Vancouver began to rise, developers realized these new homebuyers and/or investors have ``accepted`` the new reality of higher density, less personal space and anything but cheap and cheerful.

Enter the Marketers, Staging Left Concrete or frame, low-rise or tower but invariably wrapped in a ‘with it’ urban nomenclature (e.g. Bathos, Bolus, Hyperbole, Fescue, Thud, Klang, Glyph, Carbuncle, Little Ned, Etcetera or ‘etc.’ for the minimalist ultra edgy), each condo complex is presented as unique. To disguise the obvious (the stealthy steady erosion of elbow room) and set them apart from the hoi polloi competition, the new units invariably boast the usual Euro-kitchens, granite counters, wiredwork nooks, convoluted faucets, soaker tubs (very apt) and similar ‘lifestyle enhancements’ to be marketed sotto voce as the prescient investment and slam-dunk ante into the Metro Vancouver market.

September 2013

September 2013

and leaves our physical plane forever -- the average price will be $3,273 per square foot or 6.7 today’s comparable.”

Following the 1975 apex of 705 square feet, the standard new onebedroom condo in Metro Vancouver has steadily shrunk. In 2012 and at 622 square feet, it’s shy 83 square feet and is 12 percent smaller than its ‘70s antecedent.

unicorns, simultaneously ‘alive and dead’ with the outcome only decided when the ‘box’ is opened, the cat observed. In this case the ‘box’ disappeared as well. Or when that future buyer secures the mortgage, signs the sales contract, gets the keys, opens the front door . . . and walks nose first into nothing.

Whether. . . . wither . . . goes the one bedroom condo? Intrigued and with a nod to H.G. Wells, we spun up our Sigma machine, jumped aboard and followed the trend line.

Saddle Up the Unicorns/Melting Point

Zero square footage . . . ergo, infinitely expensive in the per square foot measure…

In about six generations, the brand-new one-bedroom condo in Metro Vancouver will be, for all practical purposes, never more.

The year 2013 and 400 square feet . . . 2052 and 300 square feet . . .2080 and 200 square feet as Metro Vancouver as finally embraces its inner Hong Kong . . . onwards, onward . . .

When the Machinations Stop

On New Year’s Eve 2159, it’s teetering on the edge of vacuum energy, cosmic singularities, pixies, the Social Credit party, ana and kata and similar Rudy Rucker-esque mind-bogglers.

Finally, we arrive at the logical conclusion, the ultimate end point -- but darn it, we can’t get in.

“When 2160 rings in -- just before the new one-bedroom condo goes down the rabbit hole, sucked over the (sales) event horizon

Seconds later, hello 2160 and the new one-bedroom condo in Metro Vancouver will go pop! Zero square footage, nada, zilch, bumpkiss and Happy New Year, all you future pre-sale homebuyers.

Back in 1975, that primordial 705-square-foot new one-bedroom condo sold for $53 a square foot. Over the next years the average condo footprint grew and so did prices. In 1982 it broke the $100 per-square-foot mark, slipped slightly but after that, steady as it grows . . . or didn’t.

Like the famous ‘Schrödinger’s cat’ quantum physics thought experiment, the one-bedroom condo will be existential limbo, the realm of the genius marketers and purveyors of fine purebred

In 1991 the newly constructed one-bedroom topped out at 777 square feet and then went on an eternal diet. As square footage shrank however, prices largely kept on trucking. In 1997, it broke

1 Bed Room Condo Size and Price Trend Since 1975

Landcor Prediction Time Zone

900

$3,500

$3,273

800

$3,000

705 700

$2,500

$2,455

600

500

$2,000

500 $1,787

400

400

$1,500 $1,267

300 $877

200

$1,000

300 200

$680

“Get it while you can, where you can. Don’t delay; deals like this won’t last . . . “

100

. . . and they’re right, but it ain’t what they thought they meant (lightly foreshadowed bold prediction... )

0

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The Landcor Report - The Incredible Shinking Condo

$500

100 $53

$0 1975

1980

1985

1990

1995

2000

2005

2010 Average Sqft

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2012

2020

2030

2050

2080

2115

2160

Average Sale Price (Per Sqft)

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The Landcor Report - The Incredible Shinking Condo the $200-per-square-foot mark. Seven years later, $300. The one-bedroom condo slims on as prices accelerate, breezing past $400 per in 2007. In 2010 it hits $507 but then bobbled, slipped to $489 in 2012 . . . but even so, the 3 Sigma trend line is now firmly set. Back aboard the time-line machine . . . In 2031 the price per square foot will be $877. In 2052 it will be $1,267 per. By 2080, new one-bedroom condos will sell for $1,767 a square foot. In 2116 it will be $2,455 per for 200 square feet (but imagine the great amenities). Onwards . . . until finally the twains meet. When 2160 rings in -- just before the new one-bedroom condo goes down the rabbit hole, sucked over the (sales) event horizon and leaves our physical plane forever -- the average price will be $3,273 per square foot or 6.7 today’s comparable. Now factor inevitable inflation over 147 years. Even a modest 1.5 percent per annum increase yields an 8.9 multiple which works out to $29,130 per square foot in inflation-adjusted dollars . . . for zip, diddly-squat, NTSH.

Caveats, Qualifiers: Landcor Boldly Predicts For future developers this vanishing point will represent a considerable savings opportunity in land, labour and construction costs. For building appraisers and inspectors, it will be a quandary. For future marketers -- a real challenge, but not beyond their considerable skills.

September 2013 in what is a one-bedroom unit, begging the question: ‘If so, where’s the ‘subservient’ bedroom?’) Readers should be aware our timeline doesn’t take into account the stealth effects of climate change and rising sea levels that, by steadily reducing the amount of developable residential land, could accelerate the Alice in Wonderland condo shrinkage and/or rising prices. We have also not factored in the (literal) impact of The Big One. When it happens (and it will happen but sorry, we’re not telling when), we predict the 9.0 plus Richter-scale mega-thrust earthquake and sea-bottom bouncing tsunami will have a negative effect on Metro Vancouver’s one-bedroom condo markets . . . and everything else (suddenly, Regina looks pretty good). Barring these quibbles and although one should never underestimate the persuasions of future marketing campaigns and the timeless lure of discounted prices and similar financial inducements, the absorption rate for one-bedroom condos in Metro Vancouver post 2160, will be uncertain. In our opinion, the market should be avoided by all but the most sophisticated of buyers. Infinitely expensive and albeit invisible but assuming the trend lines, market forces, marketing campaigns, fixed costs, developers’ upgrades and interior designers’ Euro (Sino?) enhancements and other factors stay on track, we can confidently predict these future new yet null Metro Vancouver one-bedroom condos will be . . . fabulous. Trust us.

Perhaps these future marketers will take inspiration from their forebears of centuries past. (For example, the ‘master bedroom’

Sound real estate decisions are made using the best possible information. Incorporated in 1987, Landcor Data Corporation has grown to be one of the most trusted providers of objective real estate data and analysis in British Columbia.

LANDCOR® Data Corporation

During the past two decades we’ve helped hundreds of clients achieve their goals by offering the most comprehensive real estate data, analysis and insight available. From real estate valuation and analysis to land economics research and systems development, our staff of highly qualified experts are here to help you find solutions to your real estate analysis and data needs. Landcor maintains the largest, most comprehensive database of historical sales and current information on BC residential and commercial real estate.

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Landcor’s database includes: • BC Assessment data on 1.94 million properties • sales transaction data for BC, including prices updated weekly • geographic location data used in custom reports

Rudy Nielsen R.I. F.R.I.

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New Westminster, BC V3L 3A7 President and Founder

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The Incredible Shrinking Manse