Central bank researchers found lower rates lift housing demand quickly while supply responds much later, showing why cheaper borrowing alone does not resolve affordability pressures.
In Canada, resales rise soon after cuts, with the full boost appearing 18 to 24 mo later; housing starts begin gaining around 2 yr later.
Researchers said strong labour markets can amplify the effect, as households feel less cautious about savings and easier lending conditions help support faster buying.
Builders respond later because higher prices and lower financing improve project viability, while planning and permits take time, especially for multiple-unit homes.
For Canada, rate cuts can add supply eventually, but because supply follows demand, researchers said monetary policy is not the best affordability tool.
