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 firstname.lastname@example.org