OTTAWA (Reuters) - Costly housing in the Canadian city of Vancouver has helped drive up prices in nearby cities, the country’s federal housing agency said in a report on Thursday.
While home sales have cooled in Vancouver since the provincial government implemented a tax on foreign buyers last year, the housing market there remains one of the most expensive in the country, and prices are not far from their 2016 peak.
The report from the Canada Mortgage and Housing Corporation found the spillover effect was strongest in places closest to Vancouver.
On average, a 1 percent increase in home prices in Vancouver immediately led to a 0.5 percent rise in nearby Burnaby and Richmond, while the North Shore had a 0.7 percent gain, the report said.
In Richmond and the North Shore, the long-term rise in home prices was as strong as in Vancouver itself, the housing agency said. The full impact can take five years or more for most municipalities.
Even cities beyond commuting distance were affected, the report said.
The report looked at the Vancouver spillover effect from 1991 through 2016 but not other factors, such as changes in regulations, that would affect home prices in British Columbia.
Surging prices in Toronto, Canada’s largest city, have also helped drive up costs in surrounding areas, prompting the Ontario government to levy its own foreign buyers tax last month.
Policymakers have pointed to Vancouver and Toronto as pockets of risk in the Canadian housing market, which has generally been robust in the years since the global financial crisis.
Concerns about high consumer debt and high housing prices ratcheted higher on Thursday after Moody’s downgraded the ratings for Canada’s major banks.
Reporting by Leah Schnurr; Editing by Lisa Von Ahn