The widening gap between the prices of first homes and “forever” homes is leaving Canadians unable to move up in the market, according to a September 8 report from CIBC World Markets.
In expensive markets such as Vancouver, Calgary, Edmonton, Toronto and Ottawa, the cost of buying a medium- to high-priced home is rising more quickly than a cheaper home, said CIBC deputy chief economist Benjamin Tal.
Tal said, “An asymmetrical trajectory of price appreciation is starting to paralyze the ‘move up’ market. The value of bigger and pricier properties is rising notably faster than less expensive properties — widening the gap between starter home and dream house.”
Certainly in Vancouver, the average price increase of 5 per cent seen in August masks the disparity in the rising cost of single-family homes, which increased 6.6 per cent year over year to a record $984,300, and the price of condos, which have risen a more modest 3.6 per cent over the past year.
Greater Vancouver MLS® Benchmark Prices % Change: REBGV August 2014 July 2014 August 2013 Detached $984,300 +0.4% +6.6% Townhome $474,900 +0.5% +3.9% Apartment $379,200 +0.7% +3.6%
Most Canadians assume they’ll start out in a smaller home, or possibly a condo, then move up to a larger home as they get married and start a family, said Tal.
"However, there are many indications that this cycle that dominated the Canadian housing market for decades is breaking," he said.
At the lower-priced end, the Canadian housing market has softened, partly because of plentiful inventory in the condo market and partly because new mortgage rules have made it harder to qualify for a mortgage.
At the other end of the market, there is a limited supply of single-family homes that has led them to rise in price more quickly, especially in the past 18 months, the report said.
Homeownership rates among 25- to 35-year-olds have dropped from 55 per cent in 2012 to 50 per cent in 2014, according to the report.
