Cooler housing market won't hurt Canada's recovery: CIBC

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Home prices aren\u0027t factored into residential investment and employment in sector isn\u0027t likely to take a hit, economist says

Potential moderation of the housing boom might not hurt the economy as much as people think because home prices aren’t factored into residential investment and employment in the sector isn’t likely to take a hit, Mendes said. Business investment — a key component of gross domestic product that lagged during the pandemic — is likely to pick up in the near term as confidence from vaccine reopenings continues to improve, he said.

The pandemic has changed the forces of economic activity in Canada, with residential investment making up a greater share of output than business investment for the first time last year in records dating back to the 1960s. Residential investment accounted for about 10 per cent of total output at the end of the first quarter of 2021, eclipsing business investment’s share of 7.5 per cent of output.

COVID-19 lockdowns prompted an exodus of Canadians from apartments and condos in city centres to homes with more space, typically further from urban areas. Low interest rates, combined with demand for larger living spaces, boosted prices and sales. With those subsiding from elevated levels, economists and policymakers have expressed concern around the financial and economic implications of a potential plunge in the market.

Increased activity in the resale housing market didn’t translate into a wave of newly minted real estate agents and support staff, Mendes said.“So, while the cooling in market activity will dent the incomes of agents and the profits of brokers, it probably won’t meaningfully delay a return to full employment,” he said.Article content

Mendes said there’s not much to fret about from a macroeconomic standpoint, however a sharp collapse in prices is still a financial stability concern — particularly for those homeowners who take on higher debt to buy property.

 

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More than 22,000 Mississauga, Brampton, and Caledon households are on the waiting list for affordable housing...But don't worry, they're building a whole 320 new 'affordable' rental for them tore

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