Canada’s lively real estate segment is among the few things keeping the economy afloat as the country experienced one of its slowest GDP growth rates on record, according to the latest numbers from Statistics Canada.
Together, red-hot housing markets and vigorous bank lending now comprise approximately 20 percent of the economy—a proportion that last manifested back in the early 1960s, reported Bloomberg
Two years since the oil crash, Canadian real estate grew by 6.8 per cent in May compared to 24 months earlier, contributing 0.8 per cent to national GDP growth in the same period. Brokers’ fees also went up by 15 per cent in that interval.
“Real estate has become the country’s biggest industry at 12.4 percent of GDP, or 13.2 percent if you include leasing,” the Bloomberg
The flip side of the real estate tale, however, is the accompanying increase in home prices and household debt, now at all-time highs.
Not helping matters is the dismal performance of the energy, mining, and engineering construction segments. The slowdown had a significant impact on the purchasing power of domestic would-be home buyers.
“The decline in resource production, coupled with the fall in engineering works, has shaved about 1.7 percent off Canadian GDP in the two years through May,” Bloomberg
The downturn has thrown policymakers, investors, and industry players on a loop of uncertainty, with the Bank of Canada projecting a strong rally in the remainder of the year as oil and exports recover, and other traders predicting a good chance of BoC Governor Stephen Poloz cutting rates by October to stimulate the economy.
“At the very least, the economy’s lethargy will add urgency to efforts by Prime Minister Justin Trudeau and Finance Minister Bill Morneau to bolster long-term growth ahead of the 2017 budget,” the Bloomberg
Manufacturing, services sectors boost Canadian economy in April
Recovery might begin in earnest only after the summer—Poloz