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No evidence of good or bad economic impact from Olympics: UBC economist

January 25th, 2010 · 19 Comments

In the ongoing debate on whether the Olympics is going to wreck or save our province, I offer this latest news release:

MEDIA RELEASE |  JANUARY 25, 2010
No evidence of a post-Olympics boom or bust for host city real estate prices: UBC study

Cities that win Olympic bids experience neither boom nor bust in their real estate prices, but gain construction jobs as they prepare for the Games, according to researchers at the Sauder School of Business at the University of British Columbia.

The UBC study is the first to use real estate variables to test the Games’ economic impact on host cities. Sauder School of Business researchers analyzed house prices and construction employment in the years leading up to and after the Olympics in Australian, Canadian and U.S. cities.

“We do not find support for the argument of host city backers that the Olympics delivers positive economic benefits, nor of the arguments made by opponents that there is some post-Olympic bust,” says Tsur Somerville, lead author and Sauder’s Real Estate Foundation of B.C. Professor in Real Estate Finance. The study’s co-author is Sauder PhD student Jake Wetzel, a three-time Olympian and 2008 gold medalist as a member of the eight-man rowing team during the Summer Olympics in Beijing.

“Our results conclusively demonstrate that while construction employment dramatically increases in the period prior to the Games, house prices are the same as they would be in the absence of the Games,” says Somerville.

“While findings suggest no economic gains,” Wetzel says, “the Games still present a very real opportunity to celebrate excellence, athleticism and human achievement. The societal impact of valuing the Olympic ideals goes far beyond economics and politics. Hosting the Games ultimately reflects pride in our athletes, city and country.”

Somerville and Wetzel analyzed whether the rate of growth in house prices and construction employment is higher in an Olympic city than a non-Olympic one at the time of the announcement of the awarding of the Games. They also looked at the data during subsequent years leading up to the Games or for a six-year period afterwards.

The study includes the Summer Olympics cities of Atlanta (1996), Los Angeles (1984) and Sydney (2000), and Winter Olympic cities of Calgary (1988), Salt Lake City (2002) and Vancouver (2010). In total, the researchers analyzed quarterly data sets for 300 metropolitan areas in the U.S., nine major cities in Canada and eight state capitals in Australia.

Findings show that pre-Game construction employment grew by 1.7 per cent in Sydney, 4.3 per cent in Vancouver and 3.9 per cent in Atlanta and Salt Lake City.

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  • Lewis N. Villegas

    I participated in a charrette planning process for Park City, Utah, site of the 2002 Olympics.

    While parallels between Salt Lake City-Park City and Vancouver-Whistler would be very difficult to draw, comments heard on site during the process from developers, real estate agents, and politicians bear some consideration.

    They remarked that the Olympics are a different kind of event from an Expo. The Olympics are over in just two weeks. Once the closing ceremonies are over, I was told, the light switch was off.

    They did not perceive a drop from pre-Olympic levels, instead what they were interested in testing was whether or not there was any way to keep the economic engine running in the post-Olympic reality.

    The difference in our region is that the economic engine of the Olympics was running alongside a bubble in the real estate market. What the dynamics of how those two economic events unwind will color much of what we see the years following.

    Furthermore, we have one mega project on the go that is not Olympic-connected. It will also be interesting to measure the difference between the kind of growth the Gateway project precipitates versus the kind of growth spurred by the Canada Line.

    The City of Vancouver, I am told, is just now reacting to the opportunity of shaping a “Cambie corridor”. I expect City Halls on either side of the Gateway are already feeling the push.

    If my assumptions are correct, the difference between Gateway and Canada Line economic stimulus will be in the type of product each transportation investment will attract.

    The former could be shaped into making brand new “walkable neighbourhoods”. The latter, I worry, will translate into suburban sprawl and its cousin, tower sprawl.

    Bring on the emissions!

  • “While findings suggest no economic gains,” Wetzel says, “the Games still present a very real opportunity to celebrate excellence, athleticism and human achievement. The societal impact of valuing the Olympic ideals goes far beyond economics and politics. Hosting the Games ultimately reflects pride in our athletes, city and country.”

    Why is this statement part of an economic analysis of the effect the Olympics have on real estate prices?

    Tax payers are footing a bill in the billions of dollars. According to this study the principle benefit they are getting in return isn’t economic at all, it’s the opportunity to feel a sense of pride. Give us a break!

    If taxes go up or services are cut to pay for this party that sense of pride is going to be difficult to maintain.

    I want to see us having fun in the streets, taking pride in our city and in the achievements of others. But it’s pure gibberish to infer that the only way we can accomplish this is by mortgaging our futures.

  • Chris

    Further to Lewis’s comment, from Wired magazine: To Create Jobs, Build Public Transit, Not Highways.

  • spartikus

    It probably goes without saying that this study is, er, extremely narrow in focus.

  • Otis Krayola

    @Wayne,

    You’re worried abut mortgaging our future?

    Wake up! Tomorrow’s here already. Our council is already introducing draconian cuts to services.

    It’s the Visionista paradigm – the Party and the Hangover all at once.

    Nothing so mundane as the Library or garbage pickup.

    But watch for more big towers!

    Oh, and more bike lanes. Unless they stress the Engineering budget.

  • Shane

    Granted, I have not read the study. But, from their media release…this is what I read:

    “First, we looked at apples. Then, we looked at oranges. Finally, we looked at rubber tires. Our conclusions are thus…”

    What do Atlanta, Los Angeles, Sydney, Calgary and Salt Lake City 8 to 26 years ago have in common with Vancouver in 2010?

  • gmgw

    Hey Otis K, reading your comment, one might almost be inclined to believe you think that the Olympic$ nightmare sprang wholly formed from the brow of Gregor and his fellow “Visionistas”. You might want to do some reading of recent history, specifically about ventures launched and imposed on all of us by the Campbellistas in Victoria. Not to let them off easy or anything, but Robertson & Co. are merely the heirs to this madness and are trying, feebly, to cope (no pun intended). “Share the blame” is the operative phrase of the day. There’s plenty of it to go around, and more on the way.
    gmgw

  • Confirmed! The only game in this one horse town: floggin’ condos.

    What’s this about TX being the only job creating game?

    So you dig a hole, fill it with wires, dump the dirt back and when its done . . . back to the dole.

    A real sustainable economy makes things and provides food we need on an on-going basis . . . jobs on-going . . .

    This UBC thing is another mindless, stupid, keep the Eloi happy scam until the horn blows . . . and the horn will blow!

  • Bill Smolick

    And this is a surprise how?

    One year after the Salt Lake City olympics ski visits to Park City were up a statistically insignificant 1%.

    Two weeks after the games Salt Lake City was a ghost town.

    The only economic benefit from the Olympics is the one the IOC reaps.

    The games used to be a celebration of athleticism and achievement in amateur sport, until they started letting muli-millionaires with spare time on their hands play hockey.

    The only sports that have remained pure are those for which there is essentially no commercial market: biathlon, skeleton, luge etc.

    Shane: what DON’T Atlanta, L.A. etc. have in common with Vancouver in 2010? Are you suggesting that it’s completely irrelevant to compare any Olympics to any other Olympics?

  • Lewis N. Villegas

    Sports is for youth, I can now state with some authority.

    There are facilities in Calgary that date back to 1988 that have been doing good service to the community for over 20 years. Whistler was the #2 sky destination in North America. It has been #1 since before the Olympics were awarded, and one hopes this will cement their place at the top.

    Tourism and youth sports are important. One is at the top of the economic drivers for our province, like it or not. The other is at the top of keeping kids off drugs and other destructive endeavours.

    Economies need stimulus simply because the Taxes represent such a huge portion of production, and we don’t have a better system.

    One of the tales of the 2010 Games may be that they were underway exactly at the time that they were needed. Kind of having the firemen hooked up to the hydrant out front, and then a fire breaks out on the roof!

    There is not very much opposition to the idea that spending on infrastructure spurs economic growth. Chris’s point above was echoed by a visiting Councillor from Portland Metro regional (and elected) governing board. We need to monitor that as it moves along.

    Does anyone really doubt that Canada Line, mistakes and all, will be a legacy in this region for decades to come?

    Besides the “type” of investment (transportation highway/transportation rail), I was interested in hearing back about this tendency that we only think “big” during Expos and Olympics (remember Montreal). Can we not do “planning” any other time?

    These international fiestas are an opportunity for their locations, and they are a moment when the sitting—or just were sitting—governments also are given an advantage. What the political parties do with the opportunity, well that is also something that we can bring to account.

    However, isn’t it foolish to give up on these things all together just because we are going to see some politics-as-usual in the course of events?

    Especially if these are the kinds of international pressures that we need to bring to bear in order to get three levels to focus on one thing long enough to deliver a product to, yes, the taxpayers.

    Just on Canada Line:

    1. We are now the only city in Canada with a rail link from the CBA (central business area) to the airport.

    2. The line was built under SFR (single family residential lots—I have the photos), in Vancouver, and state-of-the-art strip malls and SFR in Richmond (i.e. solid-sprawl).

    3. Both locations now have the opportunity to shape growth to build walkable communities.

    No, no. There is more in this pile than fodder for tax payer ennui.

  • WW

    It sounds like this UBC paper doesn’t address a condo market, which is a somewhat uniquely Vancouver phenomenon. Here’s some info:

    In Salt Lake City, the apartment vacancy rate jumped from 6% to 13% in March 2002, as all the Olympic-related workers left (there are a couple thousand Olympic “gypsies” that travel from games to games for various organizations involved, plus people who move for other temporary job opportunities who will relocate to another city or return home afterwards).

    In Vancouver, the purpose-built apartment vacancy rate was near zero 2 years ago, so I suspect most of these temporary residents are in rented condominiums.

    I expect that by April-May we will see the rental condo market vacancy shoot up. Difficulty in finding tenants and/or having to lower rental rates could lead many investor-owners to sell. A flood of inventory could push down prices.

    If you are looking to buy a condo to live in, there could be some good opportunities this spring/summer.

  • spartikus

    Does anyone really doubt that Canada Line, mistakes and all, will be a legacy in this region for decades to come?

    The Canada Line, mistakes and all, could have been constructed without holding an Olympic games. As have many transit lines around the world.

    In terms of economic development, the hosting of the Games is, at heart, an advertisement for Vancouver – and Vancouver already had a very positive international reputation. Perhaps the people of Sochi see a real need to get themselves on the map, but there is a great deal of the old “diminishing returns” in our case.

    In terms of sports infrastructure – only skiing attracts tourists year after year, and once again, the region already had 1st rate facilities known around the world.

  • “Sports is for youth, I can now state with some authority.”

    Sports are for all ages. Senior’s Games anyone? However, it’s true that sports (or any organized out-of-school activity) can keep kids out of trouble. But, it’s the regular attention of adult coaches as role models, the discipline of practices, and the availability of low-cost options for parents that don’t have a lot of disposable income that are the answer, not inaccessible and expensive venues.

    Having inner-city kids go skiing for a day is great, but the Olympics isn’t making that happen, if anything, it’s funneling money away from having even larger, similar programs. Further, one day is just that. If you want to keep kids out of trouble, stop beggaring our schools and help teachers and parents who are more than willing to donate their time for extramural sports, by giving them the financial support they need to provide kids with ongoing athletic experiences, not sporadic field trips. It makes me puke to think of kids selling crappy chocolate outside the supermarket to finance their school team, while Jacques Rogge sits and draws up his laundry list of demands for things like a wall of flat screen tvs for his hotel room.

  • Bill Smolick

    Sports are for all ages.

    Chris said it, I’m just reiterating it. Inactive PEOPLE — both youth and adults — are one of the biggest health care crises our nation faces.

  • Higgins

    “Sports is for youth, I can now state with some authority.”
    Lewis N. Villegas

    Please, do anyone remember what Moliere comedy of errors, is this line from? Thanks

  • Lewis N. Villegas

    I’m over fifty and just got in my first three hour-long runs of the month (I avoid bad weather and prefer low impact surfaces, that tend to flood, to running on the street). There was a bit of self-depricating humour that I suppose Moliere would have handled more adroitly.

    My involvement today pales in comparison to the sports I played growing up. Same goes for biking, by the way. Yet, paradoxically, regular exercise is more important for preserving health in the later years, improving quality of life and yes, saving health dollars.

    Furthermore, the habits we cultivate in our youth are the ones we are most likely to carry into the rest of our lives.

    Not all the facilities are in Whistler. Many are dotted around the Lower Mainland and some hard-wired to transit. One would hope that coaching and the ability to spot talent will be improved by the Olympic experience.

    I never took up skiing… too much cost in money and in time. But, as far as selling chocolates or whatever, the Liquor Store—after customers have made their purchase—beats the heck out of the Supermarket.

    Spartikus, you may well be right.

  • Lewis N. Villegas

    Spartikus, you may well be right. But Montreal already had a subway extension to the airport in planning. Why shouldn’t Montreal get the nod ahead of Vancouver, absent the Olympic bid?

    [last line didn’t paste]

  • landlord

    Chris Keam writes wants even more money (someone else’s presumably)for “…teachers…who are more than willing to donate their time for extramural sports…”.
    That was the first thing to go during the work-to-rule campaign of the last (illegal) strike.

  • I guess it would be impertinent to point out the disconnect between your ‘all that matters is the size of your bank acct’ beliefs and then expecting teachers to work for free, but whatev, as the kids say nowadays.

    Anyway, what I was referring to was the fact students have to sell candy to pay for very basic aspects of school sports such as uniforms, equipment, transportation, etc. I apologize for not making that clearer, even with the ‘donate their time’ part of my post. I don’t think it takes a huge shift in our priorities to better fund school sports and other clubs/activities, and AFAIK teachers and parents who are already involved in those things aren’t asking to be paid for that volunteer activity.