Canada’s Economy Is Still 30% More Dependent On Real Estate Than The US In 2006

Canada’s economy is less reliant on real estate, but still dangerously dependent. Statistics Canada (Stat Can) data shows residential investment fell as a share of gross domestic product (GDP) in Q2 2022. After the interest rate cuts in 2020, residential investment soared to over a tenth of GDP. It’s since fallen sharply, but remains much higher than the US at its peak bubble. 

Residential Investment

Residential investment is real estate’s most direct contribution to the economy. It includes home construction, renovations, and ownership transfer costs. It’s a nice chunk of the contributions of real estate investment to the economy, but far from all. Areas like finance and insurance are real estate-driven, but not included in residential investment. Neither is spending on minor renovations, such as paint. 

Canadian Residential Investment Falls To Less Than 9% of GDP

Canadian residential investment represented a smaller share of GDP last quarter. The segment was 8.7% of GDP in Q2 2022, down 1.1 point from the previous quarter and 1.5 points lower than last year. If you didn’t catch it, the past year has seen two-thirds of the decline in the most recent quarter. It was the first full quarter since interest rates climbed.

Canada’s Economy Is Less Dependent On Real Estate, But Still Dangerously Over Dependent

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

Source: Statistics Canada; Better Dwelling.

Canada’s economy is still very much overly dependent on real estate, but it’s no longer at its worst. Back in Q1 2021, the ratio peaked at a whopping 10.3 points — a mind-blowing share of the economy. Over 1 in 10 GDP dollars were generated from residential investment. It was a share rarely seen in an advanced economy, if ever. 

Canada’s Economy Is Still More Dependent On Housing Than The US In 2006

Residential investment is now at the lowest share of GDP since Q2 2020, but still has a long way to go. Just falling to the point before the 2020-rate cuts requires dropping another point behind GDP. It’s a fairly substantial move.

Despite falling, Canada’s economy is still heavily dependent on residential investment. For context, the US was considered dangerously dependent on housing in 2006 when it hit 6.7% of GDP. The concentration inevitably lead to the Global Financial Crisis. 

Canada’s economy doesn’t have the same global impact, but it’s more dependent than the US ever was. The most recent quarter shows the GDP is 29% more dependent than the US at its worst. It either requires a very long slow down of the economy or a deep contraction. Death by a thousand cuts or all at once.



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  • Rick Abrams 2 years ago

    The less dependent the better. That means Canada is satisfying as basic human need and the nation is not dependent on corruption. When a place like Los Angeles keep building long after it has a glut of housing, then you have a gigantic problem It’s similar to being a narco-drug state where the economy is dependent on the drug trade doing well. One big drawback is that far too many workers are engaged in non-productive work as far too money are involved in the corruption. What does LA have after it constructs high end apartments which no one wants? A homeless crisis since LA tore down its rent controlled units and forced tens of thousands of poor people onto the streets.

  • Ron Bruce 2 years ago

    “Residential investment is real estate’s most direct contribution to the economy” Warehousing bodies are more important than manufacturing. Jobs in construction are temporary as workers move from one construction site to the next. By the time a construction worker reaches the age of 40, they limp home after work. In comparison, local and foreign finance (Banks) Realtors and insurance/legal costs are “real estate-driven”. No one picks up a shovel providing these services.

  • Bob Walter 2 years ago

    @Rick Abrams: it is a good point you are making but Canada looks to already be past that point of overinvestment, for example:

    A lot of confidence that Canada will be OK in housing is based on massive immigration. How many of those immigrants though will turn out to have an appetite for living in an increasingly fascist and unfriendly country. If immigrants are willing and able to move to Canada they can be able to move somewhere else in the world, and Canada is dropping fast in the rankings.

    So housing might still have a lower downside than predicted.

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