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Urban & Rural BC: Identifying Data-Driven Commonalities

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A great deal of valuable information currently exists on the BC real estate market, however, there are challenges with the current approach. The geographic framework by which this information is viewed is problematic focusing on regional differences instead of provincial commonalities. The BC market is experiencing many different trends such as new dwelling types, alternate ownership models, FSBO and unique behaviours by demographic segments. Understanding these trends is hampered by missing data and an inability to link different data sources for analysis. Furthermore, most of this information is presented through a static geographic lens making it challenging for the ORE audiences to absorb and utilize. A fresh look at the data requirements for the industry will assist planning for the future. This research report is a part of the British Columbia Real Estate Association's Journey of Discovery. BCREA launched the Journey of Discovery (JOD) to help our organization and BC’s eleven member boards strategically plan for the next five years. This project seeks to understand where the greatest contributions of products and services could be for increasing the innovation of REALTORS® in service of their consumers. If organized real estate is to effectively adapt to and proactively initiate change, which we believe is necessary now more than ever, the first stage is to gain a solid understanding of the current and future states of the industry. For access to the slides with links and our other reports, please visit http://web.bcrea.bc.ca/jod/reports.htm This presentation was prepared by CE Holmes Consulting, Solvable & Monique Morden Consulting
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JOURNEY OF DISCOVERY RURAL & URBAN: IDENTIFYING DATA-DRIVEN COMMONALITIES FORCE OF INDUSTRY CHANGE 4 SLIDE DECK Please ensure you click the hyperlinks as you navigate 16 July 2014
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Page 1: Urban & Rural BC: Identifying Data-Driven Commonalities

JOURNEY OF DISCOVERY

RURAL & URBAN: IDENTIFYING DATA-DRIVEN COMMONALITIES

FORCE OF INDUSTRY CHANGE 4SLIDE DECK

Please ensure you click the hyperlinks as you navigate

16 July 2014

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“Each time you learn something new you must readjust the whole framework of your knowledge.”

Eleanor Roosevelt

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of the largest being inability to have a data driven view of the industry. It is very difficult, if not impossible, to gather and combine data from different sources (e.g., Statistics Canada and MLS®) for conducting even the most basic of analyses.

We should not limit ourselves to relying solely on geo-graphic boundaries as there are many other dimensions on which the industry could be viewed to provide added value, whether by characteristics based on demograph-ics, type of property and dwelling, ownership, residency and many more. Examining larger trends occurring across the province would assist all parts of the province in better understanding and assisting REALTORS® in capitalizing on these trends.

This report examines the similarities and differences that exist using the current data available and presents other possible frameworks for consideration. An ability to dig deeper into the market trends on different dimensions common to all areas of the province will help all levels of ORE. BC ORE has an opportunity to play a role in creating a clear market picture for regional boards, Brokers and REALTORS®, simultaneously connecting dots and stakeholders in the process.

Know Thyself

Rural & Urban: Identifying Data-Driven Commonalities is one of five Forces of Industry Change Reports designed to build a greater understanding of the BC real estate indus-try through the analysis of data. This report highlights the challenge of finding new frameworks to understand our urban and rural environments across the province, and aims to identify opportunities for greater collaboration and data aggregation across British Columbia.

The BC ORE is currently comprised of eleven different regional member boards, each varying greatly in terms of the land base and population included in their boundaries. This geographic framework has unfortunately focused the industry discussion on regional differences instead of commonalities and created a lens counterproductive to proactively planning for the future.

The current framework also creates considerable logistical challenges. First and foremost, the member board bounda-ries do not line up with any other regional demarcations—whether Canada Post postal codes, Electoral Districts, Census Divisions, Regional Health Boards or otherwise. Even within ORE there is no consistency, as the Real Estate Council of BC uses different regional boundaries based on counties within the province. This inconsistency in regional definitions is problematic for many reasons–one

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Image Credit: British Columbia Real Estate Association

Page 5: Urban & Rural BC: Identifying Data-Driven Commonalities

As the fifth largest province in the country, there is no shortage of land in BC. However, the vast majority (95%) is crown land—94% provincial and 1% federal. Having just 5% of the land under private ownership (below the national average of 11%) places considerable constraints on real estate and explains why, despite the fact we have the third largest population and second highest growth, our population density is the fourth lowest.

David Baxter from the Urban Futures Institute wrote Canada’s Rural and Urban Portrait based on 2006 Statistics Canada census data showing the urban status of British Columbia compared to other provinces. JOD updated this 2006 analysis to 2011 Census data. Some may be surprised to learn that BC is an urban province, with 85% of the population residing in urban areas and 15% in rural areas – exactly equal to that of Ontario and also similar to proportions in Alberta and Quebec. Thinking of BC as an urban province might seem at odds with the vastness of the province; but given only 5% of the land is under private ownership, the population is con-gregating in urban centers. And in fact, it is congregating in many different urban centres, not just one or two major centres as happens in some provinces (e.g., Manitoba, Saskatchewan).

Rural Myth

The shift to a predominantly urban based population has been occurring for decades. A roughly even split between rural and urban existed up until the 1940’s when the urban proportion began to steadily grow, plateauing at 85% from 2001-2011. Despite overall population growth (up 13% points) during that same timeframe, these rural/urban proportions have remained consistent and there is no sign of this changing.

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Image Credits: BCREA Journey of Discovery | Source: Statistics Canada 2011 Census Data

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David Baxter’s article went further to analyze the population by size of urban area across eight different development re-gions within the province. In 2006, Statistics Canada used five categories to define size of urban area: Rural (<1,000), (1,000-<50,000), (50,000-<100,000), (100,000-<500,000) and (500,000+). It should be noted that these eight regions do not line up with the regional boards due to an inability to match Statistics Canada data with the member board regions. Highlighting the challenges of re-gional analysis of data.

Nevertheless, the Urban Futures analysis revealed some differences among the eight developmental regions, how-ever, the commonalities are much more apparent. All of the eight regions have rural areas and small urban centers, creating a common framework for understanding the real estate needs of these areas. Beyond that, four of the eight regions have more varied sizes of urban areas (Greater Vancouver, Vancouver Island/Coast, Thompson/Okanagan, Cariboo) again creating commonalities across vast areas of the province. For the JOD project, this 2006 information was updated using 2011 Statistics Canada Census data and its newly reclassified groupings for population centres:

Common Ground

Rural (<1,000), Small (1,000-<30,000), Medium (30,000-<100,000) and Large (100,000+). These new categories reveal even more commonalities across the regions wheth-er viewed across the four regions (as shown) or the eight developmental regions. With the new categories of popula-tion centres and updated census information, the findings held true, in fact, even more similarities become apparent. • Three out four regions have all of the four population

centre categories of rural, small, medium and large. • All four regions have comparable urban centres exhibiting

common characteristics and common issues. • With the population of Prince George at 72,000 and

growing, it will not be long until the Northern Region also contains all four categories of population centres.

• While Greater Vancouver is indeed predominantly urban, it is comprised of multiple large urban areas not just one. Similarly, Vancouver Island is comprised of several larger urban areas such as Victoria, Saanich and Nanaimo.

• Common ground can be found even when considering the varying rural proportions across all four regions. For example, the number of residents in rural areas in Northern BC is almost equal to the number of rural residents in Greater Vancouver.

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Source (Top): Urban Futures Institute: Canada’s Rural and Urban Portrait | Source (Bottom): Statistics Canada 2011 Census Data

Page 9: Urban & Rural BC: Identifying Data-Driven Commonalities

In addition to the previous example which viewed the province through the lens of size of population centre, there are many other opportunities to create innovative analytical frameworks to assist in collaboration and innovation across the province. BC is not the only jurisdiction struggling with the appropriate framework as both the USA and Europe have developed similar approaches with slightly different nuances.

One approach was developed by the US Department of Agriculture where Rural-Urban Continuum Codes form a classification scheme involving nine codes that distinguish metropolitan counties by the population size of their metro area, and nonmetropolitan counties by degree of urbaniza-tion and adjacency to a metro area. This scheme allows re-searchers to break county data into finer residential groups, particularly for the analysis of trends in non-metro areas that are related to population density and metro influence.

The PLUREL project (Peri-urban Land Use Relationships) is one component of a European integrated research pro-ject within the European Commissions which is examining different frameworks across a wide variety of industries– land use being one of them. Similar to the US rural-urban continuum codes, this framework use six classifications

Rural Urban Continuum

involving population size and proximity to large urban centers. This goes a few steps further to recognize the distribution of employment in a region and transportation patterns for commuting to and from those various centres.

These models are presented for consideration and inspiration for developing a new classification system in BC that better reflects the commonalities across the province on dimensions other than traditional geographic classifica-tions. These frameworks reveal the important underlying attributes that drive consumer behaviour and influence and affect the real estate industry. BC ORE has an opportunity to drive the process for developing a more robust frame-work benefiting all levels of ORE in the province by fostering collaboration and innovation.

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Image Credit: PUREL, Peri-Urbanization in Europe, 2011

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There is a great deal of transactional information available via BCREA, BC Assessment, MLS® and the regional boards. BCREA economists alone generate a wealth of in-formation through forecasts, publications and presentations with breakdowns at the regional board level. This informa-tion is further disseminated to REALTORS® through the regional boards and is theoretically available to the general public. While not a current focus of BCREA, it is noted that the provincial association is viewed as a credible source of information for the public, despite the fact it currently lacks high awareness by the public. In fact, the data from the JOD research is overwhelming with 90% of Millennials indicating that BCREA is a valuable source of information creating a huge opportunity for BCREA.

A recent example of BCREA data collection involves a re-adjustment to the approach of analyzing whether the prov-ince and member board regions have a balanced market. The new approach, which examines whether price increas-es are in line with inflation, shows that all regions have a balanced market where the previous method showed only three regions as balanced.

The Land of Plenty

This example demonstrates the valuable information avail-able but also the complexity involved which may be limiting wider use of the data. For most consumers, and perhaps some REALTORS®, the market information is complicated, inaccessible and challenging for the average person to understand. Thus, while there is a great deal of valuable information available, much more value could be provided by creating more user friendly mechanisms for digesting complex information.

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Image Credit: BCREA Economic Outlook Image Credit: BCREA

Page 13: Urban & Rural BC: Identifying Data-Driven Commonalities

In addition to the challenge of engaging users, there are numerous holes in our knowledge base preventing us from identifying trends in the market including type of ownership, green homes, ownership residency, secondary suites and type of dwelling. For example, understanding dwelling type by transaction can only be assessed by the proportion of MLS® transactions involving single detached homes. More robust information on dwelling type exists in BC Stats databases but is not connected to transactional data. This prevents the industry from understanding trends by other types of dwelling (e.g., coach/lane homes, green homes).

Using single detached homes as a proxy for dwelling type, the data reveals part of the story. Many of the regions are within the norm with a few lying outside the norm, however, an analysis of this data by size of population centre (dis-cussed earlier) would provide more insight than by region. For example, REBGV which is comprised of many large population centres (100,000+) has the lowest proportion at 40% of single detached homes reflecting the urbaniza-tion of this region. Similarly, BCNREB, despite being the most rural region, is only slightly above average (60%) demonstrating the growing urban element in the region. Changes in the proportion of single family homes over the past 5-10 years reflects the rate of urbanization in BC with

Black Holes of Data

considerable decreases in regions with higher urbaniza-tion – REBGV, CADREB, and FVREB are all down 8% points demonstrating that factors other than geography are driving these results. An analysis of type of dwelling viewed through a framework based on size of population centre or demographic segments could be more illuminating than by region. Providing consumers, REALTORS®, Brokers and ORE with reliable and objective market data is an extremely valuable function of BCREA. In an age of big data, an untapped opportunity exists for BCREA to create a deeper and broader understanding of trends and data related to the real estate market beyond the current analysis of transaction statistics. Furthermore, consumers are looking for credible information, creating an opportunity for BCREA to expand its audience through information that is accessible, objective, transparent and user-friendly.

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Image Credit: BCREA JOD | Sources: BCREA, BC Assessment Authority 2013

2013 Sales of Single Detached Homes

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FSBO sales have been around for decades but there is scant market tracking data to understand the trend in depth. Our research revealed anecdotal evidence that the number of FSBO transactions is increasing and at different rates in different regions; but without hard data, the analy-sis and resulting discussion is ineffective. Tracking FSBO transactions is currently impossible, resulting in speculation and widely varying opinions of the magnitude and trending of FSBO sales.

BC ORE would be well served knowing more about FSBO transactions. By example, NAR has conducted a study for decades to measure the proportion of FSBO sales in 2012 is 9% based and has been decreasing over the past 20 years.

With the help of the BCREA economists, the JOD team looked at changes to a proxy measure of FSBOs through a calculation of MLS® and non-MLS® market share. While calculating the MLS® market share data is simple, comparing it to non-MLS® data is not. Non-MLS® data is comprised of several types of transactions: exclusive broker listings and subsequent sales, builder/developer sales, non-arm’s length transactions and FSBO transac-tions (a proportion of FSBO transactions will involve a REALTOR® on the selling side).

Regardless, this analysis indicates that 24% of all 2012 provincial transactions are not going through MLS® with

a peak of 36% in 2008. The proportion of non-MLS® transactions in BC has increased by six percentage points over the past ten years. This data most likely creates more questions than answers given the lack of clarity in the non-MLS® transaction data, pointing to the need to better measure and understand this trend.

The data also points to regional differences across the province, from a high of 57% in PRSCREB to a low of 13% in VIREB. Regions with a high proportion of non-MLS® transactions include: PRSCREB (57%), VREB (41%) and CADREB (39%). Again, it is difficult to determine if these trends are driven by FSBO or greater development activity. Examined over time, there are also regional differences in the proportion of MLS® and Non-MLS® transactions.• The largest increases were in REBGV (9%), CADREB

(9%), FVREB (9%), BCNREB (8%), and VIREB (4%). • Conversely, OMREB and PRSCREB have decreased

their proportion of non-MLS® transactions (7% and 6% respectively).

Clearly there is more that could be learned about MLS® and non-MLS® transactions, as the current data makes it challenging to draw conclusions. ORE could play a larger role in understanding this phenomenon and its implications for the industry and REALTORS®.

FSBO By Way of Example

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Image Credits: BCREA Journey of Discovery | Sources: BCREA, BC Assessment Data, 2013

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utilization of rural properties: Australian Rural, First National Rural, and Rural Properties International.

This creates both new challenges and opportunities for REALTORS® as they market themselves and their clients’ properties requiring additional expertise in marketing their specialty from the familiar local approach to the more complex international stage. It also presents ORE with op-portunities to create networks and track data related to this trend.

Sister Cities is an international organization established in the 1950’s developed to create bonds between people from different cities around the world. Many cities in Canada have developed Sister-City relationships interna-tionally and nationally. The intent of these sister cities is to build on similarities and create new value.

For BC ORE the concept could be expanded in scope and applied based on dimensions of commonality. A framework linking centres similar in size of population centre could create rich connections among REALTORS® who special-ize based on property type, demographics or ownership models. Imagine the information sharing that could occur, the expertise that could be developed, and the referral capabilities of a network of specialists across the province. BC ORE could develop these frameworks and enable connections throughout the province as REALTORS® cannot achieve this individually.

Global Specialization

Earlier JOD reports pointed to the trend toward specializa-tion in REALTOR® practice whether based on a demo-graphic, culture, region, property type or other dimensions. Specialization is not exclusive to urban areas. It is also occurring in rural regions where unique property types are allowing REALTORS® to focus in specific segments of the market (e.g., vineyards, islands, fishing lodges, and ranches). For these niches to be viable, it is necessary to reach a wider audience, causing the marketing of these properties to expand from a local focus into increasingly larger markets. JOD research pointed toward the challeng-es inherent in reaching a narrow segment of customers and how technological tools are emerging to support REALTORS® and Brokers in their marketing efforts.

As such these properties are being marketed locally, re-gionally, provincially, nationally and internationally. Global specializations are spreading with early entrants getting a jump on the competition in the online marketplace giving the consumer a global net from which to choose. One ex-ample of this is Vinesmart.com, a real estate site marketing vineyards around the globe: USA, Canada, Europe, South America, South Africa, Australia and New Zealand.

Australia provides an interesting case study and point of comparison to Canada as it is similarly comprised of many property types over a vast land mass. Australia is targeting international buyer through the evolution of many online specialized real estate sites based on the different

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Image Credit: BC Farm and Ranch Image Credit: Kelowna Vineyards from the Okanagan Lake, Stuart Madden, Creative Commons 2.0 Generic

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ing your home based on your usage patterns. This device could also record your physical location in your house—generating the equivalent of a Walkscore based on the utilization of a house, thereby evaluating its layout. Imagine how this type of information (and others) could change the modelling for house prices. The bigger these data sets get, the more powerful the analyses but the greater the challenge in finding and telling the story behind the data, especially when being shared with diverse audiences. There are many free and commer-cialized tools available to BC ORE which bring static data to life and increase relevancy to the user. Reonomy is a company providing data visualization tools specific to the commercial real estate industry, enabling users to quickly conduct analyses using a database of property and market-level data collected across different sources instantly view results.

The growing volume of data generated within cities, re-gions and the province presents an unprecedented oppor-tunity for the real estate industry to better segment markets and products, target policies and investment, and capture value. BC ORE is presented with opportunities for creat-ing connections between various data sets, filling holes in the data and supporting the development of interactive data visualization tools. This will be of particular benefit if BC ORE is able to develop more relevant frameworks for viewing the data.

Seeing the Forest

There is a clear move toward the connection of multiple databases in order to fill holes and expand the domain of knowledge and ultimately to facilitate analyses not previ-ously possible. More open sharing among ORE and its as-sociated partners could present all concerned with tremen-dous opportunities as it encourages greater understanding, sharing and collaboration. ORE has an opportunity to advance the value provided to regional boards, Brokers, REALTORS® and consumers through a deeper analysis of the data and creation of a broader base of data points.

The REBGV offers a version of the MLS® Home Price In-dex where users can filter the information based on region, property type and timeframe. This tool provides a window into the many types of information that could become avail-able in a user-friendly format for wider consumption and a better consumer experience.

Sifting through the current information is challenging enough, let alone when one considers the additional data points that will soon become available. Adam Ozimek explores this in an article for Forbes with the example of modelling house prices which is currently based on stand-ard data like property type, neighbourhood and square footage. While this explains 80% of the variation in house prices, the next frontier included the ability to accurately explain the remaining 20%. Ozimek suggests this could involve data from devices such as Nest—a smart thermostat that creates a customized energy saving approach to heat-

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Image Credit: www.datavisualing.com 2013/09 Image Credit: Reonomy


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