The growth of the Canadian economy—which has suffered repeated hammer blows from global oil price crashes and an ever-weakening currency—is now being largely supported by real estate transactions, according to analysts.
With growth shrinking by 0.09 per cent from January to November last year, the stagnant economy was harmed by a significant 2.6 per cent drop in commodity goods and a 1 per cent real output in services in 2015. These, in turn, affected the volume of non-residential investments like mining and oil/gas extraction.
Approximately 53 per cent of the scant economic growth last year came from the already strained real estate sector, which is seeing the beginnings of potential troubles stemming from overbuilding and overvaluation (as much as 30 per cent). As it stands, real estate represents 12 per cent of Canadian GDP.
Policy makers said that an economy operating on just one tent-pole is not sustainable. Observers added that increased household debt coupled with market oversaturation might cause significant problems in the long run.
“It is concerning to see that degree of concentration coming from one sector. This underscores the importance of real estate to Canadian growth, and also reinforces how key of a risk the real estate sector is for the Canadian economy,” Toronto-Dominion Bank economist Brian DePratto told Bloomberg Business