Canadians are feeling stressed about the state of the economy, with only 14 percent of people reporting that they are better off financially than they were a year ago. The Canadian economy has seen a shift over the years, with real estate and financial services now making up 20 percent of GDP, up from 16 percent in 1998. However, this increased prominence of real estate in the economy has its consequences.
Martin Pelletier, co-founder of TriVest Wealth, explains that the problem with real estate is that it’s a non-producing asset. Once money is invested in real estate, there is no continual economic spinoff or compounding. The Bank of Canada has been raising interest rates to slow down the housing market, but there is still a heavy reliance on real estate and government jobs for economic growth in Canada.
Canada’s economy has remained relatively stable for decades, but its growth has been sluggish compared to the U.S. and China. Business sector investment and productivity levels have been declining, indicating a need for a redirection of capital to more productive areas of industry.
The financial services sector plays a significant role in the Canadian economy, with real estate, rental, and leasing being the top contributor to GDP. This financialization of the real estate sector has changed the dynamic of home ownership as a route to middle-class equity and economic security.
While real estate remains a stable asset, there are concerns about its impact on the economy. Pelletier suggests that natural resource development, such as oil and gas, could inject more wealth into the Canadian economy if not for restrictive regulations. Bill C-69, which was passed in 2019, has made it more difficult for energy projects to be approved and has deterred potential investors.
In summary, the increased prominence of real estate in the Canadian economy comes with consequences. It’s a non-producing asset that doesn’t contribute to continuous economic growth. The heavy reliance on real estate and government jobs hinders economic diversification and productivity. Furthermore, restrictive regulations can hamper the development of natural resources. These factors contribute to Canada’s sluggish economic growth compared to other global economies.
– Statistics Canada
– Martin Pelletier, co-founder of TriVest Wealth
– Trevin Stratton, Deloitte’s national economic advisory leader
– Rob Aitken, associate professor of political science at the University of Alberta
– Lonzell Locklear, principal at Earnscliffe Strategies