The Canadian real estate slowdown is becoming a drag on gross domestic product (GDP). Statistics Canada (Stat Can) data shows the GDP sector of real estate, rental and leasing (RERL) fell in April. The decline is the first move lower in five months, due to a drop in revenues at real estate brokerages. That would be directly related to existing home sales now being past peak.
Real Estate Rental and Leasing
The real estate, rental, and leasing portion of GDP made its first decline in months. The sector slipped to $264.30 billion in April, down 0.75% from a month before. Compared to a year ago, the dollar value is 8.57% higher. Keep in mind this is one of the areas where a base effect has amplified the growth. Seasonally adjusted, it was the first drop in five months. It also lines up with home sales peaking in March, and diving in April.
Canadian Real Estate Commissions and Fees % of GDP.
Canadian real estate commissions and fees as a percent of GDP.
Source: StatCan; Better Dwelling.
Real Estate, Rental and Leasing Represents 13% of GDP
Real estate, rental and leasing has seen its share of GDP slip, but it’s still a very large share of the economy. The sector was 13.36% of GDP in April, the third consecutive month it fell. Still an absurdly large share of GDP, but it’s the smallest since the start of the pandemic. It peaked in April 2020, as the rest of the economy took a dive, but real estate was mostly still standing. A drop from peak may not be a meaningful move until the economy is fully back in operation.
Canadian Real Estate, Rental and Leasing As A % GDP
The percent of Canada’s gross domestic product that comes for real estate, rental and leasing.
Source: StatCan; Better Dwelling.
Real Estate Brokerage Commissions Took A Large Hit In April
The offices of real estate agents and brokers saw a sharp decline in revenue, as home sales fell in the month. The sub-sector represented $16.98 billion of RERL in April, down 10.56% from the month before. The year-over-year growth is 287.12% from last year, once again skewed by the base effect.
The activity of brokers and agents made a sharp decline, but it was still elevated. Even with a significant drop, April was 40% higher than the year before the pandemic. This number, which is primarily commissions, is still nearly one percent of GDP. That’s a very big share of the economy, for a relatively small portion of a sector.
Canadian Real Estate Commissions and Fees % of GDP.
Canadian real estate commissions and fees as a percent of GDP.
Source: StatCan; Better Dwelling.
RESL revenues are falling and its contribution to the Canadian economy is slipping. Most of the decline in activity is due to the drop in existing-home sales, which peaked in March. That means the numbers are likely to continue falling for the near term, but don’t get it twisted. Down from peak and records for the month can both exist. The Canadian economy is still very much dependent on real estate. Even more so coming out of the pandemic.
Like this post? Like us on Facebook for the next one in your feed.
Falling commissions and people piling in to become Realtors. Considering just a few hundred agents do almost all of the sales, a lot of people are going to be misallocated human capital, and underperforming by tax and productivity contribution.
It’s fine. When we don’t generate enough productivity, we can import people. Now two people generate enough productivity for one, and both struggle. When do I get my permanent senate position for such great insights?
If home sales fall back to normal levels, this is basically a rug-pull for GDP. Not that GDP has a meaningful impact on society, it’s just used to forecast potential tax revenues by the government.
Real estate agents on facebook be talking about how hot the market is, so you need to buy a home…. please.
Oh god. The worst is I went to school with a bunch of agents that post “don’t get left behind” or “you’ll be locked out of the market” posts on facebook, and they sell maybe one house per year, and aren’t even homeowners.
Which would be fine if they told others they were a cautionary tale. Spending their one commission paycheque on a Mercedes lease and leading people to think they’re successful is a lie to create FOMO.
Home sales are going to drop further, and so are the commissions. This is the opinion of every economist, including real estate boards. Good luck to everyone, and I hope the market pull back for sales isn’t too rough.
Hmmm, you obviously have no basic concept of economics and how inflation works. The truth is the entire world printed tons of money in the past two years. Thats why you are seeing inflation, since the job market isn’t improving we are not going to raise rates. To put it simply real estate prices will not drop any time soon. You should consider moving to a more affordable city.
The truth is that low interest rates inflated everything and priced people out. Time to raise them up and make assets cheap to buy into.
I agree with you stating that low interest rates inflated everything and priced people out.
Although I doubt that the BoC will allow rates to rise and crash bank collateral which are mostly real estate.
Pay attention to what central bankers do, not what they say.
During the 70’s, Canada’s highest inflation decade, the BoC did nothing until the FED was forced to tighten in 1979. Then, all the other little central banking monkeys followed. Doing the same today is out of the question.
Central bankers will always choose inflation over deflation.
every Canadian should make over 100 k per year to accommodate the inflation or HOUSING BUBBLE IS GOING TO BURST!
In late 90 Japan had housing bubble and printed a lot of money, can’t fix the burst 30 years later
Obviously you have now idea what goes next after inflation. You have to have a job or income or print a lot of mo=ney yourself to help the bubble to continue to grow.
Economics!
You should consider not insulting others and begrudgingly dispensing unsolicited financial advice because the viewpoint of a poster about a topic you may have a vested financial interest in differs from yours.
This is the truth behind the government adding additional construction subsidies out of nowhere. They don’t want this sector to fall before an election, otherwise they have nothing. Right now they at least have the optics of an improving economy in aggregate.
You really need to think about it to realize how screwed up it is for a tenth of the economy to be shut down, but numbers are totally fine for GDP because housing made up the difference.
Canadian Real Estate Commissions And Fees % Of GDP 18.98% in March 2021.
WTF? This can’t be true.
18.98% of GDP was lost in March 2021 in fees to sell real estate to each other.
So if real estate sales volume drops in half we lose 9% of GDP from peak.
This looks more and more like Christmas 1983. Cabbage Patch frenzy! Boomers need a cabbage patch (house for their kids and 3 for them selves). Keep co-signing and convincing your kids to buy before its too late. Fomooooooooooooooooo!
Thanks for including all the great charts in your article!