THE RENNIE OUTLOOK
rate of 16%. Applying this demolition rate to the starts and completions database allows for the estimation of the annual net level of new housing supply, how this has historically related to housing demand, and how it looks relative to our outlook of future demand in the short-run (covering the near-term period where existing housing starts can be translated into expected completions). COMPLETIONS EQUAL LAGGED STARTS. Figure 6 shows the cyclical patterns of housing occupancy demand and housing supply. The mis-match that is evident between demand and supply is driven in part by construction time lines (from potentially as short as one year for a detached home and up to several years for large, multi-family projects), and in part by the fact that future development activity tends to ebb and flow based on current demand trends. Consider in Figure 6, for example, the expanding occupancy demand in the mid-1990s and the lagged supply response that saw housing starts begin to increase several years later (in the early-2000s). EXCESS DEMAND AND SUPPLY. Another interesting feature of the relationship between housing demand and supply within the region is the periods of excess demand and excess supply. In netting down the supply data to represent only “net new” dwellings (by way of accounting for demolition counts), and comparing this to potential demand, shows that the market has generally been under-supplied relative to levels of population and housing growth. Most recently, 2017 is an outlier in that estimates of occupancy demand were well below the number of completions.
NO ADJUSTMENT FOR VACANCY. Before considering the future, it is important to note here that the supply of new units estimated to be coming to the market has not been adjusted for a vacancy (or unoccupied) factor, which would reflect homes that are being used as non-primary (i.e. secondary) residences. Recent data from the City of Vancouver show that units not occupied as primary residences ranged between 3% and 8% depending on where you look within the city and which dwelling types are being considered. RISING NEAR-TERM COMPLETIONS. Looking forward, because there was a high level of starts in both 2017 and 2018, associated housing completions are expected rise to 21,600 in 2018 and 21,500 in 2019, before tapering slightly to just under 21,000 for each of 2020 and 2021. Similar to the historical lags seen between occupancy demand, starts, and completions, the high number of recent starts is expected to exceed additional occupancy demand in the short-term future. This will in part compensate for the 2012 to 2016 period, where the number of completions that were available for occupancy came up short against expected occupancy demand. Given the growing rate of population additions and the tapering of starts that was seen after 2016, completions are also expected to come in below net additional occupancy demand through to 2021.
JANUARY 2019 — P A G E 1 0
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