More Than Half of Canada’s GDP Gain Was From Real Estate Transactions

It’s the most wonderful time of the year – especially if you’re in real estate. Statistics Canada (Stat Can) released gross domestic product numbers for Q3 2019. The numbers show healthy growth for the economy – until you dive into them. A single-industry represented more than half of quarterly growth – real estate transactions.

About Today’s Numbers

We’re looking at constant-price gross domestic product (GDP) and real estate’s contribution. Constant-price GDP removes the impact of inflation, and allows us to compare numbers more accurately. Stat Can uses 2012 dollars as the year they adjust to, so that’s what we’re using today. For real estate, we’re only looking at the biggest and most direct GDP contribution – real estate, rental and leasing (RERL). RERL is the contribution to GDP made during managing, selling, renting and/or buying real estate. To simplify it, it’s the commissions made from managing real estate transactions.

GDP For All Industries Grew 1.44%

Canada’s GDP is showing healthy superficial growth for all industries. All industries came in at $1.99 trillion seasonally adjusted at the annual rate in Q3 2019, up $4.47 billion or 0.22% from Q2. This represents an increase of $28.17 billion or 1.44% from the same quarter last year. Note the percentage changes, we’re going to circle back to those.

Canadian Gross Domestic Product (All Industries)

Gross Domestic Product (GDP) numbers for all industries in Canada, expressed in 2012 constant dollars.

Source: Statistics Canada, Better Dwelling.

GDP For Real Estate Transactions Grew 2.70%

Real estate transaction revenues is growing much faster than other industries. RERL represented $252.28 billion in Q3 2019, up $2.30 billion or 0.92% from the quarter before. This works out to $6.62 billion or 2.70% higher than the same quarter last year. Quarterly growth is 4x higher than all industries, and annual growth is over 80% higher. As you can probably guess here, it’s a really big percent of total growth. Like, an unreal amount of the growth.

Canadian Gross Domestic Product (All Industries)

Gross Domestic Product (GDP) numbers for real estate and rental and leasing in Canada, expressed in 2012 constant dollars.

Source: Statistics Canada, Better Dwelling.

Real estate transaction revenues are punching way above their weight. Transaction revenue growth is equivalent to 51.53% total industry quarterly growth. Growth for RERL over the past year, is the equivalent of 23.51% of all industry growth. Not only do real estate transactions represent a huge amount of growth in Canada, it’s been getting larger recently.

The real estate market may have cooled down a little, but the Canadian economy is still leaning on it. The business of moving people around is technically a small portion of total GDP. However, it represents a significant amount of total growth. That’s before you add in related industries, like construction and financing.

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  • Tierry 5 years ago

    Sounds like a healthy, balanced economy, driven by immigration. lol

    • Marc 5 years ago

      Wonder what the US looked like in 2006 at this point.

    • Dean 5 years ago

      Haha, that’s hilarious, not like dirty Chinese money destroyed the Vancouver housing market and the lower Mainland, as well as Toronto and the GTA. Immigration is destroying Canada, we’re all seeing the death of a once nice country, no more communities, no more unity, no more common values, all the matters is diversity and wiping out traditional First Nations and European communitues. Disgusting.

      • bruce 5 years ago

        This is a strange comment I find myself agreeing with. I immigrated here when I was 7 Im now 44. Grew up in a small mostly European family town. Things were great. Everything you’ve said is true. The problem is is we don’t allow rampant immigration and population growth the economy tanks. Im totally fine with that however the policy makers and most Canadiens are not they would prefer to make this faustian bargain to sell out the country completely in favour of some short term illusory wealth creation to fuel consumption.

      • Manny 5 years ago

        I am a brown immigrant who came to Canada 17 years ago I cant agree more with this. Canada is not what it used to be. Never seen any country changing so fast so much. There is no multiculturism. No community care about other communities’ culture or mix up with others. No common values. Too much extreme leftist values. The greed of money has destroyed this country.

  • Yvette L 5 years ago

    “Murdered Central Banker’s Warning Changed Everything for SEB”

    About how money launderers from the east have been sending cash through real estate transactions across the West. Interesting read.

    • Jessie 5 years ago

      This times a million. At the Refinitiv risk conference yesterday, one money laundering expert said “what’s the difference between Vancouver and Toronto [in terms of money laundering]? Political will to look into it.”

    • mossy 5 years ago

      I have no problem with this, except why make it sound as though the fault lies only with money launderers from the EAST? Equally culpable are the bankers, lawyers, developers (and yes, even homeowners) etc. in the WEST, who knew fully well what they were accepting.

  • Ethan Wu 5 years ago

    Half of Canada’s GDP growth was from real estate transaction fees, half a point is from HELOC related loans, and another half a point is related to equity withdrawal in financing? Oh boy.

  • GTA Landlord 5 years ago

    This is even funnier when you realize only 10% of Realtors are responsible for all transactions.

  • Average Man 5 years ago

    Can someone please explain to me, a layman, why this isn’t really really bad? It sounds really really bad. But if it’s not, please tell me why. And if it is, why aren’t more people freaking right out about it?

    • Dean 5 years ago

      Your right, we all knew this in the early 2000’s or at least saw signs of the dirty money from Asia and the dirty local realtors at work together. Now look at the Lower Mainland, a complete disaster where every conceivably quality of life has dropped dramatically.

    • Ahmed 5 years ago

      It’s not good or bad by itself. The question is what happens to people working in real estate related industries when it slows, and if the rest of the economy isn’t growing as fast as real estate commissions, how do they keep buying houses?

      It’s an impossible task to execute on, but government’s are going to try to do it anyway. Therefore, your currency goes in the dumper.

  • kevin 5 years ago

    Is this a bad thing for our economy? And does this lead to lower real estate prices ?

    • Ahmed 5 years ago

      Half the country moved in the past 5 years. In order to keep this up, the other half also needs to move.

  • Serf 5 years ago

    We live in a Neo-feudal society where rents increase way beyond the rate of inflation, and the serfs have to pay $1,850 a month to rent an apartment 1 hour away from the downtown core. Something’s got to give.

  • CAD 5 years ago

    This article is ridiculous. Looking at the data the amount realtors make is under the category “Offices of Real Estate Agents & Brokers and Related Activities” which from the NAICS codes is defined as “531210 – This industry comprises establishments primarily engaged in acting as agents and/or brokers in one or more of the following: (1) selling real estate for others; (2) buying real estate for others; and (3) renting real estate for others.” That amount at seasonally adjusted rates is $11.86 billions as of September 2019, or 0.60% of Canadian GDP.

    This article is referencing the entire “Real estate and rental and leasing” line item in the Stats Can GDP accounts which under the NACIS codes is “Sector 53 — Real Estate and Rental and Leasing The Sector as a Whole.”
    The reason this account is $252 billion is because Stats Can includes “Owner-occupied dwellings” in the calculation which from the Stats Can website is described as follows: “In order to make value added arising from the use of residential real estate invariant to changes in ownership, homeowners are considered landlords renting houses to themselves. The fictitious industry captures the imputed amount of such rents.”

    Basically if you live in your own house Stats Can estimates how much rent you would be paying yourself if you were renting it and includes it in the GDP calculation. This amount isn’t being exchanged by anyone and makes up $162.23 billion of the $252 billion amount quoted.

    The remaining $78.2 billion is from actually renting and leasing property as well as leasing and renting equipment.

    Don’t believe this nonsense article.

    • Jason Li, CFA 5 years ago

      Your point makes it worse, not better. That means half of growth is “fictitious” by your standards, meaning there’s even less growth than the fictitious economy.

      FYI, realtors through MLS transactions made about $8 billion on just sales in October, not including other brokerage revenues. Sales are up 7% nationally, which means 100% of that growth was like realtor revenue.

      Also the author says “managing, selling, renting and/or buying real estate,” which is exactly what you just described. The only one spewing “nonsense” is you.

      • Aldi 5 years ago

        Including imputed rent seems counter-intuitive in GDP calcuation; by the same logic the value of upaid housework should also be included in the GDP Calculation. Any further elucidation would be appreciated.

  • Carl Langschmidt 5 years ago

    God help us if that our economy.

  • Snarky 5 years ago

    I think the real problem is people want to keep their head in the sand, it is more convenient than the truth

Comments are closed.