Vancouver

Will Interest Rate Hike Cause Vancouver Home Price Correction?

By
REW.ca
July 17, 2017






Interest Rate Hike

Recent rate rise will have an immediate effect, but not how you might think, says top-producing agent

The Bank of Canada’s announcement of a quarter-point overnight rate increase last week, and the Big Banks’ subsequent prime-rate hikes, will have some effect on Vancouver real estate activity – but not in the direction people might expect, according to a leading local REALTOR®.

Speaking on the latest Real Estate Therapist show on Roundhouse Radio 98.3FM, local agent Keith Roy tackled a listener question that asked, “Do you think the Bank of Canada’s interest rate hike will cause a correction in Vancouver real estate prices?”

Roy responded with a laugh, “No. Good talk.”

He added, “This is not the end of cheap money. This is a slight adjustment of cheap money.”

Roy explained that there could be a small, immediate effect on the market, but in the opposite direction than people might expect.

“People who have a rate hold in place will be incentivized to make a purchase before their rate goes up. So what you’re going to see is a run on [entry-level] activity in the next 60 to 90 days.”

Roy observed that the interest rate increase will not affect home owners or home buyers at the high-priced end of the market. “Interest rate rises Buyers of [multimillion-dollar] homes are getting a low rate no matter what. You’ve got a good relationship with your bank, you’re probably trading another large home you’ve got some cash, it’s not your only asset.”

Is this a sign of further interest rate rises in future? “Maybe. We’ll see if the Canadian economy can hold onto this – there were mixed reviews about whether we were ready for a rise.”

He said that he thought that the overnight rate would have to increase by a much steeper amount to cause a significant correction in Vancouver real estate prices, and that any correction would also be caused by a rising Canadian dollar, making local housing less cheap for overseas investors. “But we’re still at under 1% - that rate has got to be pushing up to four or five before we see a significant correction.”

Listen to the Real Estate Therapist show each Saturday morning, 9-10am, on Roundhouse Radio 98.3FM and streaming on roundhouseradio.com– and email your housing questions to realestatetherapist@roundhouseradio.com


Joannah Connolly has been editor and content manager of REW.ca since May 2014. Joannah has appeared on major local TV outlets as a real estate commentator, and has moderated and spoken on several industry panels. During this time, she also spent two years hosting the Real Estate Therapist radio show on Roundhouse Radio 98.3FM. A dual Canadian-British citizen, Joannah has 20 years of journalism experience in Vancouver and London, with a prior background in construction, architecture and business media.
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