REAL ESTATE AND MORTGAGE NEWS
Games Won't Boost House Prices in Vancouver, Says Study
A new study says that hosting the Olympic Games does not prompt an increase in local house prices, nor do prices crash after the games are over. In Vancouver, where the Winter Olympic Games get underway this month, that may be a good thing. Another report says the city has the least affordable housing of 272 urban centres examined around the world, including San Francisco, New York, London and Sydney, Australia.
In the first study , "We look at housing markets before, during and after a city hosts the Olympic Games to see if there is any evidence of an Olympic bounce through an increase in house prices. We find none," say authors Tsur Somerville and Jake Wetzel of the Centre for Urban Economics and Real Estate, Sauder School of Business.
"However, in contrast to the shrill warnings of the anti-games Cassandras, we also find no evidence of a downturn or slowing in housing price growth following the games. More than anything else, our findings argue that hosting the Olympic Games is not about economic benefits. Instead, the focus in hosting the games should be on the opportunity to celebrate excellence and achievement, and to capture our collective imaginations," says the study.
The focus on house price changes is what differentiates this study from others that measure the economic benefits of the Olympics, say the authors. "Changes in house prices are an effective tool to identify benefits unique to a particular location because they have been shown to monetize an area's enhanced future economic opportunities from expected increases in employment opportunities, wages and higher local business earnings," says the study. "Critically, they will also rise from any increased quality of life that results from Olympic infrastructure spending and legacy facilities."
The study analysed house prices in Summer Olympics hosts Los Angeles (1984), Atlanta (1996) and Sydney (2000), and Winter Games hosts Calgary (1988), Salt Lake City (2002) and Vancouver. Each was compared to a similar city that did not host the games.
"There is no consistent evidence that hosting the Olympic Games result in either higher or lower house prices and as well there was no pattern for an effect during the announcement period, the lead-up to the games, or the period following," says the study. "The U.S. host cities had higher price growth following the Olympics, but this was not statistically different from the price growth in the three similar cities that did not host the games."
Somerville and Wetzel say that while they could find no economic argument to support bringing the games to town, "We do not feel that economics alone need be the litmus test for hosting the games. Parties, festivals and celebrations may not meet an economics test, but they do make life interesting to live … . The athletes spark our collective imagination and inspire us. While the impact of this intangible element on the public conscious can never be quantified, it is the strength of the Olympic Movement and a reason why hosting and participating in the games carries so much prestige."
Even without a boost from the games, Vancouver house prices are already "severely unaffordable" according to a survey by the Frontier Centre for Public Policy, a Winnipeg-based think tank. "Vancouver is the most unaffordable of the 28 housing markets measured in Canada and the most unaffordable of the 272 metropolitan markets ranked in Ireland, the U.K., New Zealand, Australia, the U.S. and Canada," says the survey. It measures affordability with an index based on the median price of housing compared to median income in each market.
For many years, housing affordability has been defined as being about three year's worth of income, say report authors Hugh Pavletich and Wendell Cox. But in Vancouver in the third quarter of 2009, the median sale value was $540,900 and the median household income was $58,200, giving a "median multiplier" of 9.3, or almost 10 years' worth of income. This is "unprecedented in modern history," say the authors.
The survey deems any index of 5.1
and over as "severely unaffordable". Other Canadian cities in that category are Victoria (7.9), Abbotsford, B.C. (6.6), Kelowna, B.C. (5.9) and Toronto (5.2).
The second-least affordable city in the survey was another former Olympic Games host, Sydney, at 9.1. The least affordable U.S. market was Honolulu at 8.2.
The most affordable markets in Canada were the Ontario cities of Thunder Bay and Windsor, at 2.2, followed by Moncton at 2.5, and two cities at 3.0 – Saguenay, Que. and Saint John, N.B.
The survey blames affordability problems on restrictive "smart growth" land-use policies. "Prescriptive land use regulation policies (principally compact development and urban consolidation) have virtually destroyed housing affordability in many markets," say authors Pavletich and Cox.