Statistics Canada reported this morning that Canada's real GDP grew 0.1% in January, beating analyst expectations for flat growth. Oil and gas extraction was up 1.6%. Construction expanded for a third straight month. Retail trade had a solid month. The advance estimate for February points to another 0.2% gain.

On paper, that's a decent start to the year. The economy contracted in Q4 2025, so two consecutive months of positive readings is genuinely welcome. TD Bank economist Marc Ercolao called it "a slightly better-than-expected start to 2026 after a lacklustre fourth quarter."

And yet. The data is already old. January's numbers were collected before the war in Iran began reshaping the global economy in ways that matter a great deal to anyone buying, selling, or holding real estate in Canada right now.

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What January's GDP Actually Shows

The details are worth understanding, because they say something real about where the economy's strength is coming from, and where it isn't.

Mining, quarrying, and oil and gas extraction grew 1.2% in January, with oil and gas extraction specifically up 1.6%. Construction continued its run, posting gains for a third consecutive month. Retail trade expanded 0.8%, with general merchandise retailers and auto dealers leading the charge. Taken together, goods-producing industries grew 0.2%.

Manufacturing went the other direction, contracting 1.4%. That's partly a tariff story. The US has imposed levies on Canadian steel, aluminum, lumber, automotive products, and copper, squeezing manufacturers who depend on cross-border trade. Durable goods and non-durable goods both fell in January. Wholesale trade also slipped, with motor vehicles and auto parts a notable drag as cross-border auto production eased.

Services were essentially flat. Real estate, wholesale trade, and transportation and warehousing all contracted. Finance, insurance, and retail trade offset some of that. Nine of Canada's 20 industrial sectors recorded growth. Eleven did not.

BMO chief economist Douglas Porter noted the January result was stronger than he'd expected "despite a seemingly endless winter and a slew of weak headline results from manufacturing and employment early in 2026." He also added the obvious caveat: this data predates the Iran conflict and its consequences.

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Then the War Changed the Conversation

On February 28, US and Israeli strikes on Iran began. Iran's response included attacks on commercial ships in the Persian Gulf and steps toward blocking the Strait of Hormuz, a narrow waterway that handles roughly a fifth of the world's oil supply. Oil prices moved fast. Brent crude, which the Bank of Canada had assumed would sit around US$60 a barrel in its January projections, briefly crossed US$100 and has remained elevated well above that baseline.

At the pump, Canadians felt it immediately. CPA Canada's chief economist noted that oil prices jumped roughly 40% following the conflict's outbreak, with consumers seeing increases of 15 to 20% at the pump in short order. That kind of fuel price spike doesn't stay contained. It feeds into transportation costs, food prices, and everything else that moves through supply chains. The carbon tax removal in 2025 had given Canadians modest relief on fuel costs. The Iran shock is erasing that.

On March 18, the Bank of Canada held its policy rate steady at 2.25% for the third consecutive time, but Governor Tiff Macklem's messaging was pointed. "Canada's economy is dealing with a lot. And now, we face more volatility." Inflation in Canada had been tracking close to the 2% target heading into the year, with core measures moderating. The March CPI report, Macklem said plainly, will show inflation going up.

The Bank's dilemma is real and it's not abstract for homeowners or buyers. If the conflict is short and oil prices recede, the shock is manageable and the BoC likely stays put. If it drags on and energy prices feed through into broader goods and services inflation, the central bank has to respond. Markets have already begun pricing in the possibility of rate hikes later this year, a significant shift from where consensus sat just a few months ago. TD and most major banks expect the Bank to hold at the April 29 decision, but the direction of risk has changed.

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What This Means for Housing in BC

Canada's housing market was already weak before the conflict. CREA's February numbers showed sales running 8.1% below February 2025, the MLS Home Price Index falling for the fifteenth consecutive month, and the national benchmark price sitting around $661,100, close to spring 2021 levels. Canada lost 84,000 jobs in February. Unemployment hit 6.7%.

BC prices were down 5.6% year-over-year in February. The Central Okanagan recorded 296 sales that month, a 3.3% year-over-year decline, with single-family homes averaging just over $1 million. That is not a market in freefall, but it is one carrying real headwinds.

The Iran war adds two distinct pressures on housing. The first is direct: higher oil prices push up bond yields, which pull fixed mortgage rates higher. GoC 10-year yields climbed to 3.50% in March, meaningfully above where they started the year. Fixed rates follow bond yields. That tightens affordability at the margins, and in a market where buyers were already stretched, margins matter.

The second pressure is psychological. Economic uncertainty, higher gas prices, and the general noise of a geopolitical shock cause hesitation. Buyers who were close to acting pull back. Sellers who needed a reasonably active spring market don't get one. Neither effect is permanent, but both are real and both are happening right now.

There is a regional nuance worth noting. Alberta and Saskatchewan, as major energy producers, are somewhat shielded and may even see modest economic uplift from higher oil prices. The Okanagan has historically drawn buyers from Alberta, and that flow of equity-rich western Canadian buyers has been part of the region's story through multiple market cycles. A stronger Alberta economy doesn't directly offset the mortgage rate pressure on BC buyers, but it does maintain one important source of demand that helps.

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The Part That Actually Matters Looking Forward

January's GDP report is a trailing indicator dressed up as current news. What matters now is what comes next.

Capital Economics has revised its Canadian home price forecast down, expecting a further 4% decline in 2026, matching last year's decline and representing a meaningful downgrade from prior expectations of stabilization. CMHC's housing market outlook, published in January, projected national GDP growth of just 0.7% for the full year, calling it one of the weakest years in recent decades outside of a recession. That was before the Iran conflict added its own weight.

The longer picture is more nuanced. BCREA has warned that the current construction slowdown, if it persists, sets up a significant supply crunch when demand eventually recovers. The pattern after 2008 is instructive: low demand hollowed out the building pipeline, and when activity returned, prices spiked hard because supply hadn't kept pace. A period of weak market activity now is not automatically a permanent condition. For buyers with solid financing and a long horizon, the math on BC real estate in the current environment can still work.

The honest summary: January's GDP headline is fine. The economy heading into the Iran conflict was soft but not collapsing. What happens in Q2 and Q3 depends heavily on how the war evolves, where oil prices settle, and whether the Bank of Canada is pushed to tighten. Those variables are genuinely unknown, and anyone who tells you otherwise is guessing.

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If you're trying to figure out what this economic backdrop means for your specific situation in the Okanagan, whether that's timing a purchase, navigating a renewal, or deciding whether to list, the team at Coldwell Banker Horizon Realty is happy to talk through it. These are complicated conditions and the right move depends on your numbers, not the national headline.