Canada is really depending on real estate to spackle shut the holes in the economy. Statistics Canada (Stat Can) data shows real estate commissions and fees hit a new high in March. The segment of gross domestic product (GDP) is growing so fast, it’s now a whole point of the country’s output. It also represents one in seventeen dollars of growth GDP made over the past year.
Real Estate Commissions and Fees
Today we’re discussing real estate commissions and fees as a part of GDP. In Canada, this category is called “offices of real estate agents and brokers and activities related to real estate.” These are fee or commission generating businesses that facilitate renting, buying, and selling real estate. Supportive industries are included, such as property management, appraisals, and listings. Those represent a relatively small share though. The majority is tied to brokerage activity, which has seen explosive growth recently.
Canadian Real Estate Commissions and Fees Rise 79%
Canadian real estate commissions and fees hit a record high in the latest GDP data. Seasonally adjusted commissions and fees reached $19.14 billion in March, up 2.56% from a month before. The number is 79.75% higher than it was last year, with only a minor base effect. Compared to March 2019, the number is 77.47% higher — still massive. The annual rate of growth in March 2021 was the largest since December 2009.
Canadian Real Estate Commissions and Fees
The dollar amount of Canadian real estate commissions and fees as determined by GDP estimates.Source: StatCan; Better Dwelling.
Canadian real estate commissions represent a big chunk of the economy. The activity was about 0.97% of GDP in March, almost double the 0.57% a year before. It’s not quite a record, but hasn’t been such a large share since April 2004. That is right around the early 2000 energy crisis, when oil prices took a dive.
Canadian Real Estate Commissions and Fees % of GDP.
Canadian real estate commissions and fees as a percent of GDP.Source: StatCan; Better Dwelling.
1 In 14 Dollars of GDP Growth Were Real Estate Commissions
Nearly one percent of GDP is a big share of the economy, but the growth represents a bigger share of the recovery. The growth in commissions and fees represented 6.96% of total GDP growth over the past year. Fast-growing home prices and sales allowed real estate to absorb more spending.
This highlights why organizations like the Bank of Canada (BoC) have been cheerleading a real estate recovery. The Canadian recovery has been moving at a breakneck speed, even with lockdowns. Canada’s GDP took a much smaller hit than most other economies, and bounced back even faster. All they had to do was make the economy more dependent on real estate.
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My real estate agent said it’s an excellent time to buy a home.
Prices are still high but demand seems to have dropped off
Unfortunately, he might be right. If Canadian’s real estate is too big to fail and our leaders prefer to print money, inflate our debt, and devaluate our currency and salary, rather than accept the inevitable bubble burst, you might be better off with overpriced real estate.
Pulled forward home sales are likley to level out, and this will fall back to more historic levels by next year. The question is will Canada have enough GDP growth in other segments to handle that kind of pullback?
Don’t believe that pull forward BS. There is no pull forward, there is inflation. When inflation goes up so does real estate because that is the one asset that can tracks inflation. Everyone needs a place to live, sadly that’s why it will continue to go higher.
Only a small portion of the real estate industry, but it’s half the size of Canada’s arts, television, and movie production.
Dear Pepp
You are fooling yourself. Inflation drives the price of necessities like food higher. When people in 2 million dollar homes are forced to sell to buy food and heating fuel, their houses go on the market along with all the other cold and hungry people forced to sell. Necessities go up. Assets go down because no one can afford to buy or rent them at overinflated prices.
Pre WW2 food made up 40% of the average family’s budget. Shelter averaged 10%. Today it is the opposite. Inflation will eat up all the excess cash people scrape together to put into shelter. Whether interest rates go up or not, Real Estate is not a sure bet.
Nothing is a sure thing on this planet.
Politicians are gambling with our future.