A new study from central bank researchers sheds light on a point I see play out regularly in Vancouver’s market: lowering interest rates can actually worsen housing affordability in the short term. Their data shows that when rates drop, resale activity surges almost immediately, with the full effect unfolding over 18 to 24 months. Yet, housing starts—especially for multi-unit projects—don’t ramp up until about two years later.
The research also highlights that strong labour markets and easier lending conditions fuel this demand spike, as buyers feel more confident and move quickly. But on the supply side, builders need time: improved project viability thanks to higher prices and lower financing costs is just the first step. Permitting, planning, and construction all take much longer.
In my experience working with investors and developers across Greater Vancouver, this lag between demand and supply is significant. Rate cuts may eventually help bring more homes to market, but supply always trails demand—so relying on monetary policy alone can’t fix affordability. Understanding these cycles is key to making smart, long-term real estate decisions.
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