Lansink on Property Values

There are 3 major techniques used to establish property values, in decreasing order of accuracy:  case studies, paired analysis (aka comps) and regression.  A case study looks at the same properties selling multiple times, a paired analysis uses a similar properties selling at the same time, and a regression study gathers data on all the sales in an area and attempts to figure out how different factors affect the price.

Ben Lansink is a professional Real Estate appraiser based in Ontario.  One of his areas of expertise is property value reductions.  Recently he published a case study [backup copy] containing 5 sales/resales of property in the Melancthon area. These 5 properties were purchased by the developer when it became clear that the previous owners seriously complained and subsequently resold to third parties with industry-protecting covenants on the titles.

The wind energy industry consistently claims that they have studies (i.e. Hoen) that show wind projects do not reduce property values.  Every study they quote uses the weakest technique, regression, to arrive at that conclusion, along with statistical significance.  I’ve written a number of critiques of these studies, all of which have significant problems.  Regression and statistical analysis, aside from being the least accurate, are also relatively easy to game to suit the sponsor, and gaming has been rampant.  Lansink is the first case study I’m aware of.  If the wind industry were serious in discovering the truth about the effect of their projects on real estate values they would adopt the findings of this study.  But when a man’s salary depends on him not understanding something…

As it turns out, I had posted on most of the same properties some time ago, so these reductions are not new news.  What Lansink’s report supplies is a more formal and complete analysis of the sales by a professional.

The study runs 76 pages, the majority of which is the documentation of the sales and resales of the 5 properties.  The summary chart is on page 62, and it tells you pretty much all you need to know (click to enlarge):

In my earlier posting I just had assumed that the sales and resales prices reflected the current market values at the times of the sales – mainly, that the developer made a fair market offer when buying the previous owners out.  Lansink takes the time to compare these sales prices to surrounding prices and finds that, indeed, the developers made what appear to be honest pre-project market value offers to the previous owners.  Since the resales were made on the open market there can be no doubt about their accuracy.  Additionally Lansink factors in the area’s general real estate price increases during the several-year interval between the sales and resales. As large as my numbers were, his are larger.

The result is a very robust study that in any sane world would be adopted by everybody who had an interest in an honest reckoning.  The consequences of having this fine study actually adopted (i.e. by the courts) are pretty painful for the industry.  I’m guessing that the industry will try to ignore it, and if/when forced to confront it, they will mumble something about Lansink being an anti-wind agitator who produces biased and anecdotal evidence.  Never mind that it is far stronger than everything they have been quoting for years now.

Will the Ontario government and legal systems care about this?  I’m guessing not.  Accepting inconvenient facts is not this government’s strong suit.  As I mentioned earlier, this isn’t exactly new news.  No sentient being should be surprised by this.  Unfortunately this government is determined to push these projects in no matter the harm to the neighbors.

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