{"id":4208,"date":"2016-12-08T10:10:34","date_gmt":"2016-12-08T18:10:34","guid":{"rendered":"http:\/\/www.roryc.ca\/blog\/?p=4208"},"modified":"2016-12-05T07:11:59","modified_gmt":"2016-12-05T15:11:59","slug":"has-canada-hit-peak-housing","status":"publish","type":"post","link":"https:\/\/www.roryc.ca\/blog\/2016\/12\/has-canada-hit-peak-housing\/","title":{"rendered":"Has Canada Hit Peak Housing?"},"content":{"rendered":"<p style=\"text-align: justify;\">There\u2019s one particularly troubling tidbit to be found amid Canada\u2019s surprisingly strong third-quarter growth: residential investment hit the skids.<\/p>\n<p style=\"text-align: justify;\">The annualized 5.5% decline in this category was its worst quarterly showing since 2010, notes Macquarie Capital Markets Analyst David Doyle, who views the details of the report as \u201cgrowing evidence that 2016 will be the year of \u2018peak housing\u2019 for Canada.\u201d<\/p>\n<p style=\"text-align: justify;\">The prime culprit for this downturn in residential investment, according to the economist, was a subcategory that serves as a proxy for real estate commissions, which had been more than three standard deviations above its long-term average as a share of GDP \u2014 right around where the similar US category was sitting 11 years ago.<\/p>\n<p style=\"text-align: justify;\">The run-up in residential investment as a whole in years past, and this segment in particular, bears eerie resemblance to what transpired south of the border in the 2000s, Doyle observes. If history repeats itself, moving past this peak in real estate commissions won\u2019t necessarily be a harbinger of imminent doom, but rather an early warning sign that a key driver of economic growth has been tapped out \u2014 which could foster more widespread weakness further down the road. Ahead of the US housing bust, the downturn in brokers\u2019 commissions and other ownership transfer costs started in the fourth quarter of 2005, well before the beginning of the financial crisis.<\/p>\n<p style=\"text-align: justify;\">Doyle attributes a portion of the drop-off in this segment to the foreign buyers\u2019 tax in British Columbia, but warns of further softness in the future tied to the federal government\u2019s macroprudential tightening and corresponding rise in mortgage rates.<\/p>\n<p style=\"text-align: justify;\">If Canadian housing is in the early stages of rolling over, the normalization process would see it shrink significantly more as a share of total output, as it currently stands more than one standard deviation above its historical norm. As such, the analyst sees real estate serving as \u201ca significant headwind for 2017 and beyond\u201d for Canada\u2019s economy.<\/p>\n<p style=\"text-align: justify;\">The implications of weakness in in the housing complex? A softer loonie, says Doyle.<\/p>\n<p style=\"text-align: justify;\">\u201cPeak housing in Canada should manifest itself in financial markets via divergent monetary policy and diverging sovereign yields,\u201d the economist writes. He calls for the greenback to strengthen to 1.45 against the Canadian dollar by the end of 2017.<\/p>\n<p><a href=\"http:\/\/business.financialpost.com\/news\/economy\/why-2016-may-be-the-year-of-peak-housing-for-canada\" target=\"_blank\">Warning Signs Grow That 2016 May Be the Year of &#8220;Peak Housing&#8221; for Canada<\/a> by Luke Kawa | Bloomberg News | Financial Post<\/p>\n","protected":false},"excerpt":{"rendered":"<p>There\u2019s one particularly troubling tidbit to be found amid Canada\u2019s surprisingly strong third-quarter growth: residential investment hit the skids. The annualized 5.5% decline in this category was its worst quarterly &hellip; [<a href=\"https:\/\/www.roryc.ca\/blog\/2016\/12\/has-canada-hit-peak-housing\/\">read more<\/a>]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8],"tags":[],"class_list":["post-4208","post","type-post","status-publish","format-standard","hentry","category-market-updates"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.7 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Has Canada Hit Peak Housing? &#8226; Rory C Real Estate | Oakwyn Realty<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.roryc.ca\/blog\/2016\/12\/has-canada-hit-peak-housing\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Has Canada Hit Peak Housing? &#8226; Rory C Real Estate | Oakwyn Realty\" \/>\n<meta name=\"twitter:description\" content=\"There\u2019s one particularly troubling tidbit to be found amid Canada\u2019s surprisingly strong third-quarter growth: residential investment hit the skids. 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