VANCOUVER — Housing affordability trends are such that, in Vancouver at least, a starter home no longer is a ticket to bigger and better digs as the years go by.
It used to be that homeowners would pay down mortgages and build equity, then be able to afford to move to a nicer house, perhaps in a more desirable neighbourhood.
Not any more.
Those pricier homes are simply unaffordable, even for owners of starter and mid-level homes.
So, by the time wannabe-buyers figure they can make the leap, they will increasingly find that the more expensive homes are out of reach.
Benjamin Tal, a deputy chief economist at the Canadian Imperial Bank of Commerce, outlined this new trend Monday in notes prepared for the International Housing and Home Warranty Conference in Vancouver.
The event, running to Wednesday, is being attended by 200 delegates who design, build, insure and provide warranties for both market and social housing.
Delegates are hearing about such things as how real estate practices have been changed by the Internet, new energy-saving innovations in home construction, and how shipping containers can be transformed into housing.
Tal explains: “The value of bigger and pricier properties is rising notably faster than less-expensive properties — widening the gap between starter home and dream house.
“Regardless of what your starting point is, and by how much your property has appreciated, the desired move-up target is getting further and further out of reach.”
The traditional cycle, which has represented a form of social advancement and “dominated the Canadian housing market for decades, is breaking.”
Nowhere more so than in Vancouver, where buyers are already fed up with a lack of real estate affordability.
Tal reports that most of the upward price activity in Vancouver for detached housing is in the high-end market — properties priced at $1.1 million or greater.
For this category of housing, average prices since 2010 have increased nearly 18 per cent, compared to growth in average prices of just two per cent or so for homes priced between $500,000 and $1 million.
The same trend is showing up in Ottawa, Calgary, Edmonton and Toronto.
But in Canada’s second-most-expensive housing market, the disparity is not nearly so pronounced between the high-end and starter or mid-level homes. For example, average prices of starter homes in Toronto since 2010 grew by nearly 30 per cent compared to luxury homes, where prices were up 50 per cent.
The upshot of this trend: People living in mid-level homes ultimately decide higher-end homes are out of their reach. So instead of moving, they renovate their existing homes.
Tal notes that over the last five years, home renovation spending, as a share of total residential investment, averaged close to 46 per cent — 40 per cent in B.C. — by far, the largest share on record.
He predicts the reno market will probably get even bigger in coming years.
The banker also observed that the condo market is playing a stabilizing role in the housing sector, providing a cheaper alternative to detached houses.
CIBC figures show a downward trend in the rate of home ownership among younger Canadians aged 25 to 34. Two years ago, 55.5 per cent owned property, a figure that has dropped to 50 per cent.
This decline might have something to do with tightened mortgage regulations that were introduced and a reduction in amortization periods from 40 years to 25.
What seems clear is that owning a detached home in Canada’s big cities has grown tougher, with the chance of moving up to posher digs evermore remote.