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This Week’s Top Stories: Half of Canada’s GDP Growth Is Real Estate and Construction, and A Big Bank Sees Vulnerabilities

Time for your cheat sheet on this week’s most important stories.

Canadian Real Estate

RBC: Toronto And Vancouver Real Estate Construction “Significantly” Outside Norm
Canada is building a lot of houses, while unaffordability rises across the country. RBC Economics notes the building is a potential vulnerability. Same with the lack of affordability, which the bank calls “crisis levels” in Vancouver. They don’t believe the risks will translate into anything material near-term though. Before you ask, they don’t define near-term, but you should be good for at least this month.
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Over Half Of Canada’s GDP Growth Came From Real Estate And Construction
Canada’s monthly GDP growth came from just 2 industries. GDP reached $1.97 trillion in May, up seasonally adjusted 0.23% from the month before. Breaking it down, real estate, rental, and leasing accounted for 24.24% of the growth. Another 27.06% of growth came from construction – over 80% coming from home building. Yes, real estate and construction accounted for over 50% of growth in May. That excludes financing, and all of the other fun stuff indirectly tied to real estate.
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Canadian Household Debt Tops $2.2 Trillion, But Growth Drops To 1983 Levels
Canadian household debt reached a new record high, but consumers are looking tired. Debt reached $2.21 trillion in June, up 3.6% from last year.  Mortgage credit represented $1.58 trillion of the debt, up 3.7% from last year. Consumer credit represented the remaining $632 billion, up 3.3% from last year. Mortgage debt showed acceleration – potentially at the expense of consumer credit growth. Consumer credit growth is now decelerating, an odd movement. Typically both credit segments grow together, since credit expansion comes with economic booms.
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Canada Is Building The Most Rental Housing In At Least 30 Years
Canadian real estate developers are scrambling to build more rental housing. There were 62,604 rental units under construction in June, up 18.53% from last year. The country hasn’t seen this much construction since 1990. Construction in Toronto and Vancouver has become very obvious, with cranes dotting every few blocks.
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Canadian Mortgage Growth Rises From Lows, But Still Not Quite Back To Normal
Canadians are comfortable with mortgage debt again, but things are far from normal. The outstanding balance of mortgage credit hit $1.57 trillion in June, up 3.7% from last year. This is the third month we’ve seen growth accelerate. The 12-month rate of growth is now at the highest level since August 2018. Before you get too excited, it’s still the smallest number for June since 2001. That also makes it the second smallest increase for June since at least 1990. Small improvements, but they are improvements.
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