How Canada’s hot housing market is propping up GDP growth

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The Canadian economy grew by just 0.1 per cent in April from March, but it received a big boost from the country’s hot housing market, according to data released by Statistics Canada on Thursday.

Real estate activity was the biggest year-over-year contributor to growth, adding $218.8 billion to Canada’s gross domestic product in April, up from $211.6 billion in the same period last year.

That means the $7.2 billion year-on-year growth in real estate activity accounted for nearly one-third of Canada’s annual GDP growth of 1.5 per cent ($24.8 billion).

The Statscan data follows a warning  from the mortgage industry that any further intervention by Ottawa to slow the housing market would be “tragic.” 

“Now that the energy sector is no longer a major economic driver, a healthy housing sector is even more essential,” Will Dunning, chief economist with Mortgage Professionals Canada, said in a statement earlier this week. “It would be tragic to unnecessarily impair this key economic force.”

The real estate and rental category measured as part of Canada’s GDP represents the output of real estate agents, brokers, landlords and other related services. In other words, it’s an indicator of the health of the resale market, as opposed to changes in overall asset values.

The one-month gain in Canada’s real GDP between March and April was in line with expectations of economists, according to a forecast by Thomson Reuters.

However, the April figures come ahead of what is expected to be a weak May, due to the devastation caused by wildfires in Alberta that forced the evacuation of Fort McMurray and the closure of numerous oil sands operations.

Earlier this month, the Bank of Canada said growth was likely to be flat or slightly negative in the second quarter, citing the fires’ effect on the energy sector.

With files from Reuters