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The early Canadian real estate boom was encouraging. But in the end, it became disturbing. Debt levels climbed to record levels, forcing the government to intervene.
The world is in the midst of a transition to a digital and carbon-neutral economy, an once-in-a-lifetime investment opportunity, but where do Canadians bet? Most people choose a house.
According to National accounts data from Statistics Canada (Statistics Canada) dating back to 1961, total residential investment surged to an unprecedented C $160.2 billion in the third quarter, nearly 9 per cent higher than the previous quarter record of C $147.5 billion set at the end of 2017.
After a brief cooling, we began to invest huge amounts of money in assets that did nothing to improve the country’s ability to create wealth. Housing accounted for 37 per cent of total investment, while corporate spending on machinery and equipment and intellectual property fell to 28.2 per cent, the highest and lowest levels since early 1993, respectively.
“the property market is unstoppable,” said Peter Hall, chief economist of Export Development Canada, the Canadian export development company. “I think this is completely unsustainable. Because we are heavily in debt, we are in a position of compromise. ”
Debt is an obvious problem. The ratio that measures households’ ability to repay their mortgages now looks better because the national savings rate soared last year. This may not last long. The Hall released a forecast this week that the economy is expected to grow 4.4 per cent this year. He believes pent-up demand will drive a rebound because a large amount of cash is held in savings accounts rather than savings accounts.
The surge in consumption, catering and tourism spending will be good for the economy’s short-term outlook. The price is that rising household debt levels will once again become systemic vulnerabilities. In other words, we are going back to the way we were before the outbreak, desperately trying to insulate an economy dragged down by a decade-long credit binge from the future.
The relentless development of the real estate industry will make this goal more difficult to achieve. The booming property market will continue to attract capital and entrepreneurial energy, which will be better deployed in more productive industries. Thousands of rational decisions may unwittingly undermine Canada’s competitiveness.
The same thing happened during the Great Depression a decade ago, when economic forces and existing incentives boosted the real estate industry.
