Canada’s Economy Hits A New Record For Dependency On Real Estate Investment

The Canadian economy defied odds, and became more dependent on real estate investment. Statistics Canada (Stat Can) residential investment data shows a surge in current dollars for Q2 2021. The most recent quarter showed a massive climb — much bigger than GDP in general. This pushed residential investment’s share of the economy to a new record high. 

Residential Investment

Residential investment is the segment of gross domestic product (GDP) related to housing. It includes the construction of homes, significant renovations, and ownership transfer costs. The measure isn’t comprehensive, since other areas like banking are dependent on housing. But it’s the most direct contribution housing investment makes to GDP. 

Low growth in residential investment is typically seen during a recession. A lack of residential investment is a sign of consumers’ lacking confidence. Housing tends to involve borrowing for most people. People tend to borrow less if they’re worried about job stability. This is typical of a recessionary environment. 

High growth can be a sign of a large misallocation of capital — both financial and human. This tends to happen when money is cheap, and has too few places to land. The US at its peak bubble saw the share of residential investment rise to almost 7% of GDP. An overallocation can amplify an economic shock, which tends to purge inefficiencies. This is essentially what happened to the US, during the Great Recession. 

Canadian Residential Investment Jumped 25% Last Quarter

Canadian residential investment has been consuming more and more of the economy. Seasonally adjusted annual rate (SAAR) of   investment hit $249.3 billion in Q2 2021. This is 0.59% higher than the previous quarter. It’s a new record in current dollars, by a significant margin. 

Isolating just the most recent quarter of data, we see the SAAR trend minimizes the data. Unadjusted residential investment for the second quarter was $67.9 billion. This is up 25% from the previous quarter, and a record high. The seasonal adjustment is flattening the quarterly trend significantly. 

Housing Investment Represents A Record Share of Canada’s GDP

Residential investment’s share of the economy is falling, according to the SAAR trend. It represented 10.1% of gross domestic product (GDP) in Q2 2021, down from 10.3% in the previous quarter. The previous quarter is the record share, so the indicator is just a little below that. 

Canadian Residential Investment As A Share of GDP

Canadian residential investment expressed as a share of gross domestic product (GDP).

Source: Stat Can; Better Dwelling.

Unadjusted quarterly investment actually shows it was a record share of the economy. Residential investment reached 11.2% of GDP in Q2 2021, up from 9.5% the previous quarter. This is contrary to the SAAR trend, which shows slowing growth. In the most recent quarter, it might actually be the exact opposite of what people have been saying. Canada became even more dependent, without smoothing the trend.

Seasonally adjusted data for residential investment shows it’s slowing. This is especially true when compared to the general economy, when seasonally adjusted. Unadjusted quarterly data shows residential investment is actually accelerating though. It might be a seasonal blip, but seasons have meant less and less for housing throughout the pandemic.

Like this post? Like us on Facebook for the next one in your feed.



We encourage you to have a civil discussion. Note that reads "civil," which means don't act like jerks to each other. Still unclear? No name-calling, racism, or hate speech. Seriously, you're adults – act like it.

Any comments that violates these simple rules, will be removed promptly – along with your full comment history. Oh yeah, you'll also lose further commenting privileges. So if your comments disappear, it's not because the illuminati is screening you because they hate the truth, it's because you violated our simple rules.

  • Omar 3 years ago

    Canada’s a one-trick pony. It’s finally starting to experience some hurdles with international students realizing the country’s industry is largely based on exploiting them for rents.

    • Whiskey Foxtrot 3 years ago

      Read a report from a bank that mentioned more than half of the country’s investment capital is in building new homes. Expansion of business and industry? No, we need more houses! Who cares if people ever get sustainable employment.

    • Scott 3 years ago

      Not just international students… Canadians are overpaying as well.

      • SH 3 years ago

        His point is that Canada may have hit a wall as far as its ability to trick more foreign nationals into coming to Canada to feed the bubble.

        • D 3 years ago

          More will come, Canada despite all of its ill is better than every country in Africa, Asia, and Latin America. People will kill (have killed) to get here even with the disaster currently fomenting.

          • Melony 3 years ago

            THAT IS A BROAD, OVER GENERALIZED STEREOTYPE. Please check the world map – you are talking continents. !!!

          • Jasmine 3 years ago

            Better than every country in 3 huge continents?????? seriously???
            you are comparing a 200 yr old country (or less) to ancients!
            The damage done to canada by powerfuls and spineless citizens and freeloaders will show up soon.

    • Kimberly 3 years ago

      Omar you are partly right. I agree. There are so many charging so much more than they should be. It capitalism at its best. Out of control capitalism. This is all daily new in Canada. When I was a young renter we didn’t have problems finding affordable housing that matched our incomes.

      • Glenn 3 years ago

        Capitalism isn’t to blame. It’s government policies which forces prices higher and won’t allow prices to come down.

      • SH 3 years ago

        Comments like this are so frustrating and illustrate why the pro-affordable housing forces are so ineffective. It’s a LACK OF CAPITALISM that is to blame. It’s the government (and Bank of Canada) preventing the market from correcting as it naturally would. How can you not see this, Kimberly?

  • Christopher Barclay 3 years ago

    The Bank of Canada claims this is “needed.” Can you imagine how bad this recovery would be without everyone trading homes back and forth? I’d love to see how much of the “recovered” GDP is just the extra activity from residential housing.

    • Jason Chau 3 years ago

      ~20%, so it grew 2x the rate of the economy from last year. Means about half of the growth needs to level out to get back to pre-pandemic levels of “healthy.”

      The economy is also about 20% less recovered than they’re implying it is using the overdependence.

  • Glenn 3 years ago

    What share of BC’s economy comes from RE invesment?

  • D 3 years ago

    Pigs at the trough. Everybody wants to get in on real estate now, it’s exactly like the shoe shine boy telling JFK’s dad what stocks to pick a few months before the 1929 stock market crash. There’s a sucker born every minute, IMO people should dump their houses now and rent for a few months. It’s coming.

Comments are closed.