Photo: Kama Guezalova/Flickr
Driven by higher output from the manufacturing, resource extraction and construction sectors, Canada’s real GDP rebounded from an October slump to rise 0.4 per cent in November. While the country’s economy now looks set to end 2016 on a high note, some experts are concerned that the real estate and rental and leasing sector could jeopardize future gains.
Statistics Canada data released January 31st shows that the sector was one of the few that declined in November. While it fell just 0.2 per cent, it’s the first drop that the real estate and rental and leasing industry has seen since May 2012. November’s real estate and rental leasing sector decline also impacted the legal services sector, which sank 2.6 percent that month.
As mentioned, some market watchers are concerned that the fall could threaten the Canadian economy moving forward. “Over all, the drag on the economy from the oil price slump has finally faded, but the decline in real estate is a sign that the nascent housing downturn represents a new drag on economic growth,” Paul Ashworth, chief North American economist at Capital Economics, said in a note.
There are indeed signs that a housing market slowdown could be coming. While 2016 was a record year for Canadian home sales, the consensus is that 2017 likely won’t stack up. As Gregory Klump, chief economist at the Canadian Real Estate Association, said earlier this month, “[h]ome sales are unlikely to benefit the Canadian economy as much in 2017 as they did in 2016.” He sees the country’s new mortgage rules dampening home sales this year.
Royal LePage made a similar prediction this month. “In 2017, we anticipate a movement away from the regional extremes of real estate feast and famine — and that is a very good thing,” said President and CEO Phil Soper.
The Canadian housing market’s direction this year will become more clear in the coming months. Ashworth also cautioned that US President Donald Trump’s new policies could slow Canadian economic growth. “It also remains to be seen whether the Trump administration’s policies will be a positive (via fiscal stimulus) or negative (border adjustment, protectionism) for Canada,” he said.