According to a new report from the Canada Mortgage and Housing Corporation (CMHC), the rate at which prices in any given municipality will grow is measurable and consistent with commuting distance from the city.
In some cases, the resulting price increase, which CMHC calls the “spillover effect,” can take several years to set in, but this is not always the case; sometimes the effects can be immediate.
According to the CMHC, a 1% increase in Vancouver home prices has been found to cause an immediate 0.73% price jump for homes on the North Shore. In Burnaby and Richmond, prices have responded by increasing 0.45% within the same quarter. The farther the commuting distance from Vancouver, the lower the correlation (see Figure 1 below).
The effects have been shown to continue over the next several years. For example, that same 1% increase will, after five years, have caused an increase closer to 1.2% on the North Shore.
“In Richmond and the North Shore, the long-run spillover effect from Vancouver was as strong as the long-term effect on Vancouver itself,” the CMHC said in its report. “When prices increased unexpectedly in Vancouver, they eventually had the same effect on Richmond and the North Shore.