Skip to content
Join our Newsletter

High home prices due to Vancouver failing to keep up with demand: CMHC

A “supply response that was weaker than expected, given the upsurge in demand” is the primary cause of escalating home prices in Metro Vancouver since 2010, according to a major new study released February 7 by the Canada Mortgage and Housing Corpora
New houses in British Columbia

A “supply response that was weaker than expected, given the upsurge in demand” is the primary cause of escalating home prices in Metro Vancouver since 2010, according to a major new study released February 7 by the Canada Mortgage and Housing Corporation (CMHC).

The study, Examining Escalating Housing Prices in Large Canadian Metropolitan Cities, looked at both demand and supply sides of the housing equation in Vancouver, Calgary, Edmonton, Montreal and Toronto between 2010 and 2016.

On the demand side, the CMHC said it “undertook statistical analyses to determine the extent to which rising home prices are consistent with the economic forces that are conventionally associated with upward price movements – including higher disposable incomes, positive population growth and low mortgage rates.”

The federal housing agency said that the combination of these economic factors played the largest role in rising demand over the study period. “While house prices increased by 48 per cent in Vancouver over the 2010-16 period, those conventional economic factors played a part in nearly 75 per cent of this increase, according to our estimates.”

The CMHC added that investor and speculative activity “also contributed to house price increases since 2010, but to a lesser extent than traditional economic factors.”

The agency reported that domestic investors also played a role, in addition to overseas investors. The 226-page report said, “We worked with Statistics Canada to develop detailed data on rental income from properties held by individual investors. These data highlighted to us the significant extent to which Canadians purchase properties to enhance their incomes. It also suggested to us that these investors may have played a critical role in increasing the supply of new housing in Canada. Although further analysis is needed, we therefore caution that actions curtailing investors’ interest in financing new housing construction could impact long-term housing supply adversely.”

The CMHC’s study was released the day after the agency published a report examining the growth of non-permanent residents in Canada and their increasing impact on the housing market, in Vancouver and across the country.