Vancouver is seeing the biggest home price gap increases in the country – not just between condos and houses, but also within the detached home segment, according to a CIBC World Markets report issued September 16.
The report said that the price gap is “widening the fastest at the highest end of the market – a fact that might reflect the impact of foreign investment activity in that space.”
Report author Benjamin Tal, deputy chief economist at CIBC, said, “The greatest challenge facing the hot Toronto and Vancouver housing markets is the continued asymmetrical price appreciation where for the past decade, the prices of more expensive properties are rising faster than less expensive properties.”
The report said that this “asymmetrical price appreciation” has been most prominent in Vancouver over the past decade, where the price of luxury homes has climbed nearly four times the rate of those in the lowest price range.
“Our research suggests this may have major implications for home owners looking to move up who now find they are priced out of this segment of the housing market,” added Tal.
Tal also observed the dangers of referring to average prices when assessing the real estate market.
He said, “The increase in the average house price masks a widening gap between the surging prices of detached properties and relatively muted increases in the price of condo units.”
The report added that although Canadian household debt is rising at an increasing pace, this is largely driven by increased mortgage borrowing, which over the past year accounted for 80 per cent of Canadian household debt.
Tal also found there was no notable rise in the pace of credit growth over recent months, suggesting that the Bank of Canada’s recent interest rate cut to record lows did not lead to a spike in personal borrowing.
The report added that while household debt levels in Canada are climbing, delinquency rates continue to decline, and are currently at their lowest levels since 2009.
“Even as Canadians take on higher debt levels, it’s clear the vast majority are paying their bills on time,” said Tal.