It's still very rare:
Only 2500 people in ALL OF CANADA make $1.845 million or more!
Why do you say that?
In my very limited and anecdotal experience, their spending habits are more guided by interest rates on real estate. If interest rates are high, they have less money to spend, so they spend less. If interest rates are low they have more money to spend so they spend more. The actual value of the home is of less importance.
I think you are correct that recently people have made real estate decisions guided by interest rates, exactly a strategy that places them at risk if there is a sudden adjustment. Certainly low interest rates have lured alot of people into a false sense of security that they can carry more debt because of it. So yes, they may spend more on real estate but this is exactly the moral hazard Carney is concerned about.
What DaveTO has correctly described is what economists call the "Wealth Effect". As people feel richer (more equity because their assets are increasing in value), they are inclined to spend more. Reagan used this to justify decreased taxes for the wealthy, arguing they would buy more with more disposable income and therefore increase demand for goods.
Australian dollar is almost at par with Canadian dollar.
A 764 sq. ft apartment was sold, in an auction, for $ 580,000 or $ 759/sq ft. Bubble might be by Australian standards. Hardly, a bubble by Canadian standards.
Location, location, location. That being said $759/sq ft is in general an insane valuation for residential real estate.
To me a normal cost per square foot would be between $200-300 per sqft. That would make an 1800 sqft 3 bedroom home worth say $450,000 and an 800 sqft condo around $200,000. I know that doesn't seem to make sense for those of you focused on the condo market...but then again I would tend to believe that the current condo market represents a historically exceptional period, not a new norm.
You can believe this or not but the implications are clear, that the house market may or may not be overvalued but if it is it is less overvalued than the condo market.