Peak-oil spike reshapes the suburbs
The reality of peak oil will see properties classified into two types in the near future, according to Simon Fraser University professor Anthony Perl.
One will be properties from which owners can get to work, leisure activities, and services predominantly by car. The other offers alternatives to the automobile such as public transit, biking, and walking.
“The one that is accessible without a car will have a higher value,” Perl told the Georgia Straight in a telephone interview during which the director of SFU’s urban studies program tracked changes in oil prices with a ticker he keeps on his desk.
A few minutes into the conversation, oil futures on the New York Mercantile Exchange rose 50 cents a barrel to $125.98. It was $110 a few weeks ago, Perl noted. Before he hung up, the price was up to $126.11 a barrel.
According to Perl, coauthor with Richard Gilbert of Transport Revolutions: Moving People and Freight Without Oil (Earthscan/James & James), current property values in the U.S., where the subprime-mortgage crisis has unleashed a sea of foreclosures, demonstrate how surging oil prices can affect the real-estate market.
Perl said that cities with more suburban sprawl are suffering more in terms of depressed prices than denser areas that are less dependent on cars.
“I think that there is an obvious relationship between the way the land is used and the transportation alternatives that are available,” noted Perl, a panelist in a forum on the future of transportation to be held at the SFU Harbour Centre campus next Thursday (May 22) at 7 p.m.
A new study by Oregon-based economist Joe Cortright suggests that spiralling oil prices in the last five years burst the American housing bubble that swelled partly due to relaxed lending practices and speculation.
Properties located in cities and neighbourhoods that require residents to go on lengthy commutes and don’t provide many transportation alternatives have fallen in value more deeply than those in “more central, compact and accessible places”, Cortright wrote in Driven to the Brink: How the Gas Price Spike Popped the Housing Bubble and Devalued the Suburbs.
“The collapse of the housing bubble, punctured by the gas price spoke, marks a watershed point for the nation’s suburbs,” Cortright wrote. “When gas was cheap, buying a house in a distant suburb where housing prices were cheaper seemed like an affordable choice for many families. But as the more severe decline in housing prices on the urban fringe over the past year illustrates, $3 a gallon gas has made low density development a false economy across the nation.”
As an example of how oil prices have affected property values, Cortright wrote that setting aside factors like house size, lot size, and neighbourhood characteristics, a house close to the centre of Austin, Texas, costs $8,000 more than a house a mile farther away. He also noted that a house’s value increases by $4,700 for each minute saved on commute time.
Former Vancouver city councillor Gordon Price is among those watching with close interest the developments in the American property market in light of surging oil prices.
“It’s part of the larger question about how the future is going to play out in the world of more expensive gas, carbon taxes, where you’re going to put the investment, and whether if, as promised, increasing density actually delivers a reduction in transportation costs,” Price explained to the Straight.
Price said that an increasing acceptance of the theory of peak oil has led more people to rethink the drive-till-you-qualify approach in purchasing properties. However, that doesn’t necessarily mean the death of suburbia.
“You may be living and working in a suburban environment, and if that environment is designed so that it’s possible to cycle or walk or take transit, it may in some ways be more competitive than a downtown environment,” Price pointed out.