A publication
from June 2011 by the Bank of Canada illustrates how nominal house
prices in Vancouver have significantly increased in recent years. The
diagram below is based on data shown in that publication:
 |
| MLS average resale prices. Historical. Thousand Canadian $. Latest date: April 2011 |
The following diagram
compares real house prices (i.e. house prices independent of
inflation), mortgage interest rates and the cost of carrying the
mortgage (i.e. the annual amount of interest to pay for a mortgage at
the shown rate for a house at the shown price):
 |
| Jan 1992 = 100 |
So, while real house
prices in Vancouver have kept increasing, mortgage interest rates have kept
decreasing at almost the same rate. As a result, the cost of carrying
a mortgage has increased significantly less than the house prices
themselves, making it possible for people to pay for living in expensive houses. Of course, this does not reflect
on the time it will take a family to pay off the mortgage for a
house. Even considering the increase in real family incomes, assuming historical amortization rates, for houses bought in 2011 this will still be more than twice as long
as for houses bought in 2000.
Data Sources: 1) House Prices, Bank of Canada publication, Chart 16. 2) Inflation data, Statistics Canada, Table 326-0020. 3) Mortgage interest, Bank of Canada publication, series V122497.