19 December 2018

“It was a great period of strong activity, but the days when housing market was the main driver for Canada’s growth are officially over”, – Benjamin Tal and Royce Mendes said.

It’s not good news as the real estate investment is more important to Canada’s economy today than at any other time on record.

Tal and Mendes say that residential investment accounts for 7.5% of Canada’s economy, which is a record high level. In addition to it, the share of people employed in home construction and real estate is also at almost record high.

“It means any slowdown will have even a stronger impact on Canada’s economy,” compared to the previous downturns.

The full influence of the rate hikes on the housing market shows itself only in a year and a half, so the consequences of the last summer’s increase are yet to come. According to Tal and Mendes, it’s disturbing that the market has turned down so sharply even before that period.

CIBC economists believe that Toronto condo market, which managed to avoid the correction so far, will also follow the rest of the market and show a decline in 2019.

In case of Vancouver, even a stronger struggle is expected than in Toronto, as the population is growing more slowly here, and there are signs of condo overbuilding.

Meanwhile, not all specialists say the correction will continue. For instance, TD Bank economist Rishi Sondhi predicts home sales increase next year.