Extreme land value follies in Vancouver

Credit: tglucas500 via flickr
Credit: tdlucas5000 via flickr

Up in Vancouver BC, analyst Jens von Bergmann calculates that the increase in land value for single family houses over the past year exceeded the total income earned by the entire population of the City.  Median increase was $262,000, average was $318,877.  Von Bergmann estimates this to be equivalent to $126/hour, assuming people work a 40 hour week 62 weeks per year (allowing for multiple-worker households).  By comparison, actual labor yields an average income of $26/hour (all figures in multicolored Canadian dollars, of course).

But the land price appreciates every hour of every day, so it might make more sense to calculate the median increase as $29.89 (mean $36.38) per hour.

Of course this cannot continue indefinitely, but something like it has been going on for a long time in Vancouver, as well as a few other cities.  Wealthy international buyers from less stable places want a refuge, as well as perhaps an investment.  But even this group, depending on developments overseas, must eventually be limited.  Some analysts — Garth Turner comes to mind — have been warning of a crash for years and years.

What really impresses me about von Bergmann’s analysis is that BC assessment authorities appear to do a decent job of estimating land value, and making the data broadly available.  It’d be worth something to live in a place like that.

h/t Wealth and Want.

Real estate can help pay for transit

Haven’t posted much lately; busy with other things, including trying to clear off my desk.  In the process of which I found some notes of interest

How do you fund transit in the “most liveable city in the world?” Vancouver uses the real estate tax to cover about 35% of its operating shortfall (net of fares).  Fuel tax covers an almost equal amount (See this pdf). One can imagine how well Chicago’s transit system could run if funded this way, assuming also that it was competently planned and managed.

Unfortunately, Vancouver fails to fund capital costs in this way, relying instead on what Canadians call “senior governments,” meaning provincial and federal funds.  Probably that has something to do with the continuing real estate bubble in the area.

I also found notes I took at a conference in July concerning Japanese high speed rail services.  Japan is said to be the only country with privately-owned high speed passenger rail.  How is it funded? Hint: JR-East, one of the big operators of high speed trains, gets 32% of its gross revenue (see this pdf) from real estate it owns, and intends to grow this to 40 by collecting more of the value that good transport gives to real estate.