Rising interest rates may not lead to B.C. home price declines: BCREA

Interest rates are expected to tick upward in the coming months, and some hope this could lead to price declines in B.C.’s hot real estate market. But a new study from an industry group doesn’t expect that formula to play out.

While we have seen that combination lead to cheaper home prices in the past, BC Real Estate Association senior economist Brendon Ogmundson doesn’t expect to see it happen this time.

“We’re coming from a market which just set a record in terms of home sales, and also is at a record low in terms of listings,” Ogmundson told CityNews.

“Supply has never been lower. So in that environment, to generate prices falling, you need a real surplus of listings over sales.”

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He’s run the numbers and says one scenario could see home sales drop 25 per cent over two years — however, property prices would largely stay flat.

(Courtesy: BCREA)

“Because supply is so low, even in some scenarios where the Bank of Canada raises (interest rates) very aggressively and sales decline a lot, it’s going to take a really long time to get into a surplus supply situation where prices start to fall,” Ogmundson said.

Many leading economists believe the Bank of Canada will bump up its benchmark interest rate next week.