‘Spillover effect’ from Vancouver boom: report

The impact of Vancouver’s booming housing market can be felt as far away as Kelowna, once you start looking at the long-term impact on the country’s most expensive market for housing, says Canada Mortgage and Housing Corp.

In a report Thursday, the Crown corporation is pinpointing the spillover effect on other markets in the province beyond Vancouver where the local real estate board reported this month that prices were recovering in April following the impact of a 15-per-cent tax on foreign buyers imposed in August 2016.

“The spillover effect is strongest in municipalities adjacent to the City of Vancouver. As the distance increases, the spillover effect generally becomes smaller, but only up until a point. Beyond commuting distance, the effect is similar regardless of distance,” said the report written by Braden Batch, senior market analysis with CMHC.

Even in Kelowna, almost 400 kilometres east of Vancouver, CMHC said it is noticing the impact of the Vancouver housing market where the composite benchmark price for all residential properties in the metro area rose 11.4 per cent in April from a year ago to $941,100. Prices have risen five per cent in the last three months after remaining mostly flat.

It may take a while, but CMHC says every price gain in Vancouver can be felt even in places like the B.C. Interior. “The spillover effect only becomes fully realized over a long period of time, such as five years or more, for most municipalities in British Columbia,” according to the report, which calculated the impact of every one per cent increase in Vancouver housing prices. “After fiveyears, in places as far away as Kelowna, for example, prices were 0.5 per cent higher than they would have been otherwise.”

The impact on areas closer to Vancouver can be immediate, the CMHC said.

It said the effects are “related to changes in the Vancouver housing prices in isolation” and other factors could impact prices in particular markets.