Later this year, the Bank of Canada is widely expected to embark on its first interest rate tightening cycle since 2018. In this Market Intelligence, Too Tight? The Impact of Bank of Canada Tightening on BC Housing Markets, we will consider how high interest rates might rise and using both historical data and model simulations, we analyze how BC housing markets may be impacted.

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Summary Findings:

  • The Bank of Canada is signalling that in response to elevated Canadian inflation, it will begin raising its policy rate or “tightening” monetary policy this year.
  • Historically, Bank of Canada tightening has led to falling home sales and flattening home prices.
  • With markets so out-of-balance, it will take a substantial decline in demand to return active listings to a healthy state.

Model simulations show that the most likely outcome of this round of Bank of Canada tightening will be home sales falling to near their historical averages and for home price growth to moderate, but because of severely low supply, it is unlikely to result in significant home price declines.

Market Intelligence Report is published by the British Columbia Real Estate Association. Real estate boards, real estate associations and REALTORS® may reprint this content, provided that credit is given to BCREA by including the following statement: “Copyright British Columbia Real Estate Association. Reprinted with permission.” BCREA makes no guarantees as to the accuracy or completeness of this information.