Photo: Kyle Pearce/Flickr
As home prices continue to climb in the City of Vancouver, so do the prices in surrounding BC cities.
A spill-over effect from Vancouver has hit adjacent municipalities the strongest, according to the Canada Mortgage and Housing Corporation’s (CMHC) latest Housing Market Insight report published today.
“Essentially when you have a price movement in Vancouver you’ll see it most strongly in places like Burnaby, the North Shore and in Richmond,” CMHC Senior Market Analyst Braden Batch tells BuzzBuzzNews. “And the further out you go you see a smaller effect,” he adds.
The report analyzes spill-over effects based on home price changes in Vancouver solely impacting price changes in other markets.
Using home price data in BC from 1991 to 2016, CMHC completed a historical analysis to determine the average spill-over effects of the past. To determine a city’s spill-over effect, CMHC says it can only be fully realized over five years or more.
Vancouver’s short-term spill-over effects had the biggest impact on Richmond and the North Shore, which each saw a house price increase of 0.73 per cent, followed by Burnaby where prices went up 0.45 per cent.
With more residents opting for condos in Burnaby, Batch says this could be a reason for a weaker spill-over effect on the city.
“If you look at the history there, Burnaby had a larger share of apartments and it seemed to densify a little bit more than these other markets and that’s sort of thrown out as a hypothesis of why you see that different effect,” says Batch.
Spill-over effects are also tied to a city’s commuting distance from Vancouver, says CMHC.
With 57 per cent of BC jobs located in the Vancouver Census Metropolitan area and most commercial activity in the City of Vancouver, CMHC notes a significant amount of people commute for work.
Because employment has a fundamental impact on housing markets, the farther a city’s commuting distance is from Vancouver, the lower home prices are, says CMHC.
Meanwhile, CMHC notes that surrounding cities with the lowest home price growth, such as Langley and Surrey, also experienced higher population growth.
Vancouver homeowners leaving the city and potentially buying in other nearby markets is also a route for spill-over effects to occur, says CMHC.
This is possible in a market like Kelowna, where its spill-over effect is not related to commuting distance but likely linked to people moving out of Vancouver and buying elsewhere.
Even though CMHC provides an analysis of how Vancouver is having a spill-over effect on nearby cities, Batch says predictions about future home price growth cannot be determined.
“The urban environment has changed, you might even see employment centres popping up, you have more population, which is another dynamic to think about," says Batch. "You have all of these final factors that we typically talk about with housing markets, they’re all changing all the time,” he adds.