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Housing

Canada's Housing Market: A Secret Weapon No More

Strategic Insights

— 1 min read

In a trade war that has battered various sectors, Canada's housing market, long treated like a "go-to" sector for growth, is experiencing a downturn that experts say could have significant implications for the economy. According to Toronto Dominion Bank chief economist Beata Caranci, the housing market's vital role in stimulating growth is waning, with falling interest rates and rising unemployment contributing to a decline in home sales. Residential housing accounted for 7.6% of Canada's gross domestic product in 2024, a significant increase from 4.3% in 2000.

Key Takeaways:

  • Residential housing averaged 7.6% of Canada's gross domestic product in 2024, up from 4.3% in 2000.
  • Home sales fell 13.3% in the Greater Toronto Area in May from the same month in 2024, and the MLS Home Price Index for the region dropped 4.5% over the same period.
  • StorageVault, a publicly traded storage company, saw a significant decline in customers using its facilities while moving from one residence to another, or when a residence is being renovated, due to a struggling housing market.
  • Unemployment rose to 7% in May, the highest since 2016, outside of a spike early in the COVID-19 pandemic, and job losses are a dominant factor in missing mortgage payments.
  • The housing market, which previously provided a "1, 2, 3 economic push" through higher prices generating more sales, leading to more purchases of housing furnishings and renovations, is now working in the opposite direction, potentially affecting GDP.

Statistics:

  • Residential housing accounted for 7.6% of Canada's gross domestic product in 2024.
  • Home sales fell 13.3% in the Greater Toronto Area in May from the same month in 2024.
  • The MLS Home Price Index for the Greater Toronto Area dropped 4.5% over the same period.
  • Unemployment rose to 7% in May.
  • Household indebtedness in Canada rose from about 100% of disposable income in the 1990s to about 174% currently.

Sources:

  • The Globe and Mail, "Toronto Dominion Bank chief economist: Nothing's coming through in housing market"
  • Bank of Montreal, "Note to clients in May"
  • Albert Central, "Interview with chief economist Charles St-Arnaud"

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