A new Bank of Montreal report has helped underline how much the Canadian economy relies on the housing market.
Despite a crippling pandemic, Canada's unrelenting real estate market has remained strong. Douglas Porter, BMO's chief economist found that the real estate sector now makes up for 9 percent of the country's entire economic output.
“To say ‘that’s an all-time high’ would be an understatement,” Porter explained. That’s well above the historic average of around 6 per cent, Porter noted, and it’s twice the share of the economy than housing comprises in the U.S.
Porter believes quicker population growth, lower mortgage rates, and a higher degree of population in the country's largest and priciest cities explain the massive gap seen above.
“A much more fundamental answer may simply be that on balance Canadians have made a collective choice to allocate more resources to (and thus ‘consume’ more) housing than other countries,” he added.
After avoiding the U.S. housing collapse of 2008, most Canadians were led to believe the country's housing market to be impervious. Even facing a reality of a sombre winter rife with lockdowns and even curfews, sentiment in real estate skyrocketed to record highs, as illustrated in Bloomberg Nanos index consumer confidence index.
It begs the question, if the most severe economic scare seen in decades, can't halt the country's real estate market, is there anything that can? “Who is to judge if this type of consumption is better or worse than other forms of spending?” asked Porter, “The focus will revert to this underlying issue when the pandemic eventually fades as economic concern number one,”