{"id":5365,"date":"2017-03-31T10:10:14","date_gmt":"2017-03-31T17:10:14","guid":{"rendered":"http:\/\/www.roryc.ca\/blog\/?p=5365"},"modified":"2017-03-29T18:15:58","modified_gmt":"2017-03-30T01:15:58","slug":"canadas-approaching-a-downward-housing-cycle","status":"publish","type":"post","link":"https:\/\/www.roryc.ca\/blog\/2017\/03\/canadas-approaching-a-downward-housing-cycle\/","title":{"rendered":"Canada\u2019s Approaching A Downward Housing Cycle"},"content":{"rendered":"<p style=\"text-align: justify;\">Residential construction has been making up a record share of Canada\u2019s nominal GDP recently \u2014 and that\u2019s a problem, suggests BMO.<\/p>\n<p style=\"text-align: justify;\">Meantime, the Canadian economy\u2019s increasing reliance on housing is elevated compared to where it stands in the US, a further sign of possible trouble ahead, adds the bank\u2019s chief economist, Douglas Porter.<\/p>\n<p style=\"text-align: justify;\">\u201cBoth the gap with the US and the level of activity are loud alarm bells for Canada\u2019s market,\u201d he writes in a note sent to clients this week.<\/p>\n<p style=\"text-align: justify;\">\u00a0\u00a0\u00a0\u00a0 <a href=\"https:\/\/www.roryc.ca\/blog\/wp-content\/uploads\/2017\/03\/Canada\u2019s-approaching-a-downward-housing.png\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-5367\" src=\"https:\/\/www.roryc.ca\/blog\/wp-content\/uploads\/2017\/03\/Canada\u2019s-approaching-a-downward-housing-300x240.png\" alt=\"\" width=\"558\" height=\"446\" srcset=\"https:\/\/www.roryc.ca\/blog\/wp-content\/uploads\/2017\/03\/Canada\u2019s-approaching-a-downward-housing-300x240.png 300w, https:\/\/www.roryc.ca\/blog\/wp-content\/uploads\/2017\/03\/Canada\u2019s-approaching-a-downward-housing-768x615.png 768w, https:\/\/www.roryc.ca\/blog\/wp-content\/uploads\/2017\/03\/Canada\u2019s-approaching-a-downward-housing.png 959w\" sizes=\"auto, (max-width: 558px) 100vw, 558px\" \/><\/a><\/p>\n<p style=\"text-align: justify;\">Porter was not available for comment when BuzzBuzzNews called him recently to find out why, exactly, these points are cause for concern. But BMO Senior Economist Robert Kavcic took the call to explain.<\/p>\n<p style=\"text-align: justify;\">\u201cResidential construction goes through pretty clear multi-year-period cycles,\u201d Kavcic tells BuzzBuzzNews. \u201cRight now we\u2019re obviously at the high end of what we\u2019ve seen historically.\u201d<\/p>\n<p style=\"text-align: justify;\">Kavcic also agrees the economy right now is too reliant on residential construction activity, which accounts for about 7.5% of the national GDP and includes the building of new housing and reno projects as well.<\/p>\n<p style=\"text-align: justify;\">In the US, residential construction is closer to making up 4% of the nation\u2019s nominal GDP.<\/p>\n<p style=\"text-align: justify;\">Kavcic says for Canada, roughly the long-run average of 6% of the GDP, would be a healthier share for construction to contribute to.<\/p>\n<p style=\"text-align: justify;\">\u201cBut you do go through cycles obviously when housing stock is running quite a bit hotter to meet demand and then periods like the 1990s when we had Toronto and pretty much all of Ontario in a long, prolonged recession, especially in the housing market,\u201d he adds.<\/p>\n<p style=\"text-align: justify;\">Residential construction gains in terms of their share of the GDP since 2014 don\u2019t necessarily reflect a surge in construction activity. \u201cIt\u2019s actually been relatively stable,\u201d Kavcic.<\/p>\n<p style=\"text-align: justify;\">Rather, the pullback in energy sector has partly been responsible for heavier reliance on housing, he suggests. He also notes a lot of the recent strength has been coming from renovation spending.<\/p>\n<p style=\"text-align: justify;\">\u201cIt is for sure reflecting an upgrading of older housing stock, those post-war single-detached bungalows that are getting upgraded or expanded,\u201d he explains.<\/p>\n<p><a href=\"http:\/\/news.buzzbuzzhome.com\/2017\/03\/canadas-downward-housing-cycle.html\" target=\"_blank\">Canada\u2019s Approaching A Downward Housing Cycle, Bank Suggests<\/a> by Josh Sherman | Buzz Buzz Home<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Residential construction has been making up a record share of Canada\u2019s nominal GDP recently \u2014 and that\u2019s a problem, suggests BMO. Meantime, the Canadian economy\u2019s increasing reliance on housing is &hellip; [<a href=\"https:\/\/www.roryc.ca\/blog\/2017\/03\/canadas-approaching-a-downward-housing-cycle\/\">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-5365","post","type-post","status-publish","format-standard","hentry","category-market-updates"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Canada\u2019s Approaching A Downward Housing Cycle &#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\/2017\/03\/canadas-approaching-a-downward-housing-cycle\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Canada\u2019s Approaching A Downward Housing Cycle &#8226; Rory C Real Estate | Oakwyn Realty\" \/>\n<meta name=\"twitter:description\" content=\"Residential construction has been making up a record share of Canada\u2019s nominal GDP recently \u2014 and that\u2019s a problem, suggests BMO. 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