Canadian real estate might oppress the economy

Real estate observers are in fear that the present housing status might in future negatively affect the general economy. The short level of supply in the housing sector is becoming a major concern for not only the sector but the country as a whole.

According to a report released by the independent Parliamentary Budget Officer, residential investment will contribute little to economic growth from 2018 to 2020. This is a bad sign for the economy as the real estate sector in the past has contributed immensely towards economic growth.

The federal government had made attempts to address the housing crisis but with little outcome although many are still hopeful that the effects of the new policies made by the government will be seen in 2017.

What is quite known is that the new laws introduced have in some led Canada’s two most expensive markets, Toronto and Vancouver into separate paths.  While the average home prices in Vancouver began to decline in October by 37%, the average home price in Toronto increased by 23% in November.

Residential investments have in the past given a lift to the Canadian economy and although it is predicted that during the first few months of 2017, housing will contribute a modest raise towards the economy, this will however take a turn in the following months unto 2018.

As the years continue, the contribution of the housing sector towards economic growth will steadily decrease.

In its projection for 2017 to 2018, the Bank of Canada is anticipating a 0.2% decline in residential investments towards the economy in 2017 and also a 0.1% decline in 2018.

New home supply through 2011 outdistanced the demand for new homes but things took a turn from 2012 to 2015 with demands exceeding the supply of new homes.

The supply of new homes is expected to reach its maximum for 2017 at 198,900 units but this figure is predicted to drop to around 170,900 units from 2019 to 2021.