Over Half of Canada’s GDP Growth Came From Real Estate and Construction

Canadian real estate is still one of the biggest drivers of the economy. Statistics Canada (Stat Can) numbers show gross domestic product (GDP) climbed in May. The monthly climb, which was higher than expected, was driven by growth in real estate and construction.

Canadian Gross Domestic Product Rises 0.2% In May

Canada’s real gross domestic product (GDP) made an increase on both a monthly and annual basis. GDP came in at $1.97 trillion in May, up 0.23% from the month before. This represents an increase of 1.37% compared to the same month last year. The monthly increase is higher than analysts had expected. The 12-month change was 29.97% below the median growth rate over the past 5 years. That’s a mixed message on growth.

Canadian Gross Domestic Product Growth

The 12 month percent change Canadian gross domestic product.

Source: Statistics Canada, Better Dwelling.

Real Estate Hits A New High, Over 12% of GDP

Canada’s real estate sector is growing at nearly twice the pace of GDP. Revenues for real estate, rental, and leasing hit $250.69 billion in May, up 0.43% from May. This represents an increase of 2.67% from last year. The segment is now 12.75% of GDP, a little under the all-time peak of 12.92% reached in May 2016. Keep in mind this doesn’t include the financing, and construction of real estate.

Real Estate As A Percent of Gross Domestic Product

Real estate, real estate rental and leasing as a percent of GDP.

Source: Statistics Canada, Better Dwelling.

Construction Jumps From The Month Before

Construction made a big monthly jump, but fell short of last year’s number. Construction reached $137.93 billion of GDP in May, up 0.89% from last year. This represents a decline of of 4.88% from last year. Residential real estate represents $49.62 billion of the amount, up 2.18% from the month before. The growth for this segment is also down 5.57% from last year. Construction made a large contribution to the monthly GDP rise, but was a drag on annual numbers.

Construction As A Percent of Gross Domestic Product

Real estate, real estate rental and leasing as a percent of GDP.

Source: Statistics Canada, Better Dwelling.

Over Half of GDP Growth Was Real Estate and Construction

The real estate and construction industries were responsible for most of May’s rise. GDP increased a seasonally adjusted $4.52 billion in May. Broken down, the growth in real estate rental and leasing accounted for 24.24% of that growth. The increase in construction represented 27.06% of growth, residential construction being over 80% of that number. That was a lot of percentages, but the takeaway is pretty simple. Real estate and construction were 51.3% of the monthly growth in May.

Real estate is still a major driver of the economy, despite the slowdown in resales. Which makes sense, since there’s a record amount of new real estate construction. One headwind to note is that most of these buildings going up were purchased a couple of years ago. Slowing absorption of pre-sales over the past year could present a hiccup in the future.

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  • Tia Wolfe 5 years ago

    During the Great Recession real estate jumps a full point worth of GDP, and everyone thinks this is going to be normal going forward?

    • Jin 5 years ago

      Residential investment in Canada is higher than it was during the 2008 bust, higher than it was in the US before the crash, and has only been this high in Canada during the 1970s. There’s a lot of interesting dynamics going on in this regards.

      In the late 1970s, Canada also had a real estate flight issue. People were worried about wages not growing, few opportunities to move higher, so they invested in real estate driving it to similar levels of building. Great for housing supply, but it ended up forcing people to run inflation very, very high in contrast.

      Debt deflation is going to be much more complex of an issue than Canada’s bank economists present. They can run inflation to deflate the record debt levels, but then the cost of borrowing runs high too. At the same time, modern monetary policy also depends on low rate, credit bound stimulus. It’s actually a problem so complex, not even central banks fully understand it, so there’s a scramble to try and figure it out.

      • Trader Jim 5 years ago

        Even some junk bonds are negative yielding now. EU negative bound. Japan is negative. Switzerland is negative. You need a 4% cut to kick start and economy after a recession, and most advanced economies don’t have that kind of gas without dipping into deep neggies.

        You know you’re printing too much money when institutional investors have to pay high risk borrowers to take out a loan.

        • cynic 5 years ago

          exactly right. in the worlds history, every fiat currency has failed. we have learned nothing, or rather the puppet masters whose greed exceeds their intelligence don’t care. down and down we go, with our kids left holding the proverbial bag

  • Matt 5 years ago

    Anyone know what the overbuilding is like, and where it falls back to regular amounts of building? Because if it falls 30% or so, it’s going to be a kick in the gut.

    • Trevor 5 years ago

      There is no overbuilding in Canada, because the units are sold in advance. It’s not like the US, where they build and then sell the units afterwards.

      • Trader Jim 5 years ago

        Much wrong is here.

        Let’s start with the US has a similar set of development financing rules compared to Canada.

    • Ryan 5 years ago

      I’ve wondered this myself – if all these buildings were pre-sold, I assume that the majority will be occupied at some point. The issue I see is that these people moving into the new builds are coming from somewhere – some will be first time homeowners, but many will be current renters or homeowners. Once they move into their new build, there old unit/house will be available.

      If demand slows, and pre-sale buyers have another property to sell, or landlords need to find a new tenant, someone is going to get kicked in the gut.

      • Trader Jim 5 years ago

        Don’t forget the investor aspect. 40% of units sold in Toronto are to investors, and half of them are negative caps about to face with a lot of purpose built competition. There’s also all of the agents that bulk buy units with 5% down, and try to sell the assignment before the next 5% is due.

        If there’s a perception that money can be made, people create excess demand. The more public potential returns become, the more excess demand is created. A junior in my office, who makes a decent paycheck, bought 5 units because his agent said he can sell them at a discount. Which, to me, seems odd that the agent couldn’t find the capital himself, and would rather split the profits if it was such a sure thing.

        • Ryan 5 years ago

          Articles like this just convince the masses on “how rich” average people like the junior in your office:


          When you look at the math in the article, it doesn’t make sense to me. Coming out $50 ahead a month isn’t great, and when special assessments, interest rate changes, and if the market tumbles, most of these investors will be lucky to break even.

          If they liquidate now, maybe they will win – but it sounds like most people keep doubling down.

        • @xelan_gta 5 years ago

          First of all it was 48%, not 40% and the number was for 2017 completions = 2013-2014 purchases.
          If you look at purchases around 2017 share of the investors will be in the 75% range.
          That should be true even today since even RE agents say very few legit homebuyers are going for new condos which are selling at 40% premium compared to identical resale and benchmark price across the whole GTA of $800k.

  • rustinpeace 5 years ago

    good to know our economy is diversified and producing products that will make us globally competitive……smh

    • Ahmed 5 years ago

      I often wonder what the pitch is to new immigrants.

      “Come to Canada, it’s a better life.”

      Cool, what can I do there?

      “It’s just better, the economy is booming.”

      What’s the economy booming from?

      “Sigh. Dude, if you don’t come, the economy crashes.”

      • John Wayne 5 years ago

        Real world example.

        One year ago our IT department hires an immigrant from Singapore, skilled pro on the cisco/networking side of the business.

        He just let us know that him and his wife are returning to Singapore in a few months…

        You might ask why is that? Answer is: pay too low, housing too expensive.

        I’ve heard of some anecdotal cases of this, but this is a very real first hand account.

        6 figures is not even enough for this town anymore. Forget mortgage, even if you want to rent the prices are astronomical.

        I’ll take a 25% pay cut and move to Ottawa…where I’ll still be winning compared to the mess here.

        • rustinpeace 5 years ago

          similar case at the bank i work in. 2 people from India left after 6 months here. A few years ago getting a job at a bank right after landing here was a dream come true. Now not so much. There are still people getting away from horrible living standards in other countries but if they have money and a good education there are other places in the world that will give you a better standard of living with potentially better weather

        • Bluetheimpala 5 years ago

          hmmm, this smells like BS. Housing was at the same level or higher 1 year ago. If you’d said he showed up 5 years ago your story would seem more plausible. You can definitely rent in the city with a 100K HHI and I would think his wife had to be employed as well but let’s assume your 6 figures is HHI. Maybe you’re being honest but probably not, regardless your IT buddy is a moron and the situation you purport to be fact is like being at the end of the line at Timmies, seeing the prices on the board but then complaining it is too expensive when they get to the cash. He knew what he was getting into a year ago. Boo Hoo…tock. BD4L.

          • rx81 5 years ago

            You must be living in a bubble. The dip lasted till April and continued onwards and upwards. I’m in the market right now and waiting have been waiting for prices to drop over the past year but they haven’t. Some areas like Oakville, if they don’t sell, they’ll take the house off the market for a month and relist for 50k more and sell in a week. So in your little story it’s like seeing your cup of coffee at Tim Hortons on the board for $2, you find a toonie in your pocket and think it’s your lucky day but by the time you reach the cashier either they’ve run out of coffee or the price is now $2.15

            Wake up and smell the coffee.

      • Mossy 5 years ago

        Best comment ever.

      • Joe 5 years ago

        It probably goes like this:

        Come to Canada, the government is handing out freebies in so many ways! With more coming during election years every 4 years. Free healthcare paid by people paying higher taxes so if you are in your late 40s/early 50s and want to retire/semi retire and not want to worry about high healthcare cost that can bankrupt your nest egg if you fall critically ill at older ages, come! There is even ODSP and OW that feeds you should you become eligible for them.

        Bring your kids to study here (but maybe work in the States after) and then bring your aging parents too! Buy a house here and enjoy all that Canada has to offer. No fear that the government will take possession of your assets unlike in some countries.

        So many other benefits, so what are you waiting for? Come!

        • John 5 years ago

          I think you’ve misrepresenting this.

          Everyone pays an equal proportion to Health Care based on tax bracket percentage, its a disgrace to our society to suggest only high income earners pay for everyone’s Health Care.

          Basic OHIP covers major medical emergencies at a hospital or general practitioner visits. But don’t think for a second retirees don’t pay a significant dollar for medical and dental coverage, if they can even afford it. And if they can’t afford it and need prescription drugs that is a large additional expense.

          It is not so simple as bringing family to Canada… you have to go through the sponsoring process (minimum 12 months) and prove you can financially support all who you sponsor.

          Not a Canadian Citizen? Your Post-Secondary tuition just quadrupled.

          • Joe 5 years ago

            My friend, you have too much faith in how the system suppose to work. So many easy/obvious loopholes that immigrants can go through to avoid these taxes they are supposed to pay.

            For example, a couple in their early/mid 50s comes to Canada and becomes a PR via Skilled Labor. They bring their two kids along who are PR as well through the process. The kids pay local rates when they enter universities. Meanwhile the couple is unable to find a high paying/equivalent to what they are making in their home country job and have to settle for a lower paying job say 50k/year.

            They pay low taxes (dollar amount) but gets the same free healthcare as Canadians who lived and paid high taxes throughout their working lives. With the extra wealth (assume lower taxes in their home country) they accumulated throughout their working lives, they buy their dream house as houses in Canada is still cheaper dollar-wise compared to a similar property in their homeland. This drives up house prices and poor cash-strapped locals can’t own a property. After this, if they still have extra cash laying around, they then buy condos/second properties and rent them out and tenants pay for their mortgages. 🙂

            Next, they sponsor their parents over. With their modest 50k income, they are still able to sponsor their parents! Aging parents come over and puts a strain on the healthcare system.

            In addition, kids qualify for OSAP as their family income is low. More free MONEY with grants/etc! Upon graduation, kids perhaps work a few years here, gets experience and gets their citizenship but moves back to their home country to work as income taxes here are too high. Then repeat the cycle again when they turn 50 except this time, they are Canadians and can come back to Canada to retire anytime.

            Multiply this by the number of immigrants coming to Canada and you will see why taxes keep increasing and eats up so much of the average Canadian income (https://ca.finance.yahoo.com/news/taxes-eat-up-44-of-income-for-average-canadian-household-report-152745917.html)

      • zz 5 years ago

        most new comers I know (at least from china) have no issue with buying a house straight up…. a 3 bed room apartment (not condo) in shanghai is about 2mil Canadian Dollars.
        not sure why our wage stagnates

        • Joseph 5 years ago

          What are you talking about? On the Century 21 website for Shanghai, you can purchase 650sq ft units for under $100k US. Multiple listings.

          I hope you didn’t pay a realtor $2mil Canadian for a 3 bedroom apartment. Will take a century to recover that kind of price increase.

  • CanadaSucks 5 years ago

    This support what I have been saying about Canada. Canada produces noting of value for the world. Two main pillars of Canadian economy ( GDP) are real estate and immigration.

    I bet if you make a calculation of the how much GDP can be associated to temporary visa student, temporary worker visa and other temporary immigration visa programs, you would find that immigration contribute to 25% of Canada GDP.

    Canada is a failed nation incapable of competing into international market. Every government either liberal or conservative supported this immigration, real estate policies. This tell me that deep inside, every governmental official knows that Canada is a failed nation. The Thailand economy is more diversify then the Canadian economy, that tell you a lot about the Canadian economy.

    If you are young, before investing time and energy in Canada, just travel a bit. Young Whites now seems to like Eastern Europe and South East Asian.

    • cynic 5 years ago

      um, we have Justin, who will teach all peoplekind what we have to offer

    • Bluetheimpala 5 years ago

      Lol…I’m not sure any part of this is factual. I won’t even unpack this the same way I don’t unpack bullshit that my 4 year old son says. I just roll my eyes and give him a tickle…tickle tickle…tock.BD4L.

  • Paul 5 years ago

    Here here

    How a city can collapse.

  • Chester Pape 5 years ago

    How much of that is money laundering using professionals to clean dirty money via the Big Five banks? It’s clean money if the nominee using those banks to wash the laundered monies.

    You can’t tell me with a straight face that some 18-year UBC student from an emerging economy could automatically buy a Fraser Valley or Bride Path mansion, and also buy the latest year Ferrari or Rolls Royce to drive for classes. Either their parents love them too much, or something is amiss.

  • Snarky 5 years ago

    2 million want to storm area 51 to see aliens and we can’t even make an impassioned plea to government to fix the economic mess they created. I naively thought Canadians were nice and too polite to protest now I’m starting to think we are complacent and indifferent. Somehow things will just work out and we will wait patiently so as not to ruffle feathers including our own

  • Nick S. 5 years ago

    Came to Canada in 2001 with 40k. Left in 2008 with 4k and a 70k job. Felt I could do no more than live pay cheque to pay cheque and in debt for my life. Moved to Dubai and got a 120k tax free job. Saved 40% of my salary and bought two units downtown core (queen and king) for 350k each in 2016. They are now worth around 500k each. Now almost ready I have saved enough to pay them off and reckon could make 3.5k in total off rent per month after paying taxes and expenses.

    I now earn 200k and still by saving 40% now have also paid off two units in Dubai 200k each and get 1k each in rent. Work a normal 8-5 job. Am debt free and for a total pay down of 1.1m own 4 units and easily will make 5-6% annual return on rent alone. I am 44 so feel can still earn till I turn 55. Units in Toronto will pay for my 3 kids education and units in Dubai are my saving for retirement.

    Point is I feel if I had stayed in Canada I would have had 4 units still but been paying mortgage on all of them and still waiting for a time to be debt free on day. Probably been working day and night and commuting huge distance to make ends meet. I live 20m from work, live in a villa with a pool, gym, kids go to private schools and have 2 debt free cars. Never had to borrow a cent in my life.

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