The cross-border effect of monetary policy on house price expectations

Using region-level data from the Canadian Survey of Consumer Expectations from 2016Q3 to 2024Q4, we estimate the impact of Chinese monetary policy surprises on expected house price growth in Canada. Our findings suggest that tighter monetary policy in China leads to lower expected house price growth in Canadian regions with large Chinese populations. Our study shows that this effect is transmitted through lower capital outflows, higher loan interest rates, and lower Chinese house prices. Our study suggests that the monetary policy of a country from which real estate capital inflows originate can explain the spatial heterogeneity of local house price expectations. • We study the impact of Chinese monetary policy on Canadian house price expectations. • Tighter monetary policy lowers house price expectations in Chinese-populated regions. • This impact operates via capital outflows, loan interest rates, and house prices. • China’s house prices play a key role in the transmission process.