StatCan: GDP in real estate industry sees sixth straight month growth in October

Declining interest rates appear to already be giving a bump to Canada’s real estate business.

 

According to Statistics Canada, gross domestic product in the real estate, rental and leasing industries grew for the sixth straight month in October.

 

The GDP rose 0.5 per cent that month as activity reached its highest point since April 2022.

 

Lower interest rates attracting buyers to the real estate market may be driving the growth, one expert says, after a period of high rates and inflation caused a lull in the market. While there may be continued GDP growth in the coming months, experts cited rising housing demand and potential tariffs as a concern.

 

The greatest contributors to the October increase were realtors’ and brokers’ offices and activities related to real estate, which experienced 6.3 per cent growth.

 

The GTA and Greater Vancouver markets drove the increase in national home sales that month, the report found.

Overall, the economy grew 0.3 per cent in October, as the mining, quarrying, and oil and gas extraction sector pushed up the goods-producing industries 0.9 per cent and the real estate and rental and leasing sector contributed to the 0.1 per cent rise in the services-producing industries.

Declining interest rates spurred activity

Keith Reading, director of research at real estate company Morguard, attributed the rise in activity and GDP for the sector, primarily, to declining interest rates.

 

The Bank of Canada made its first interest rate cut in more than four years this June. Since then, it has made five consecutive cuts in total.

 

“We’re seeing a pretty solid uptick in housing market activity in general,” Reading said, noting first-time homebuyers and investors have been re-entering the market over the past few months.

 

Between April 2022 and that first rate cut, mortgage rates had been climbing, Reading said, and buyers “retreated to the sidelines,” Reading said.

 

Inflation was also high, which hurt “the bottom lines of Canadian household balance sheets,” and encouraged first-time homebuyers to hold off on entering the market, he added.

 

Eric Lombardi, founder of housing advocacy group More Neighbours Toronto, said there’s a risk the GDP is rising due to speculative activity.

 

“Fake value is being created as a result of higher prices for existing housing,” he said. “So people are not building things. We’re not really creating value, materially, but there’s an artificial creation of value.”

 

He said it’s a problem if investment and disposable income is spent in the housing market without anything new being created, especially amid a housing shortage.

 

New mortgage rules will likely spark continued activity

Reading predicts activity will continue to rise thanks to recent changes to mortgage rules.

 

He pointed out that the federal government introduced a number of changes on Dec. 15 — including broader eligibility for 30-year amortizations — and that earlier this year, it was announced that mortgage renewals and switching lenders would no longer require a stress test.

 

StatsCan noted that advance information indicates the real estate and rental sector cushioned a 0.1 per cent decrease in the overall economy in November.

 

Mining, quarrying, and oil and gas extraction, transportation and warehousing, and finance and insurance all decreased, but were partially offset by increases in accommodation and food services and real estate and rental and leasing, the report said.

According to a Canadian Real Estate Association (CREA) report this month, national home sale activity rose 2.8 per cent in November compared to October, making for 18.4 per cent cumulative growth since May, just before the central bank’s first interest rate cut.

 

The increase in sales were driven by Greater Vancouver, Calgary, Greater Toronto and Montreal, as well as smaller cities in Alberta and Ontario, the CREA said.

 

Bank of Canada suggests 2025 will have slower rate cuts

As interest rates decrease, more buyers will enter the market, putting upward pressure on housing prices, Reading said.

 

“If demand increases, eventually those prices start to edge up again,” he said.

 

That’s why, he said, the Bank of Canada announced this month that cuts in the new year would be more gradual.

 

Another concern for affordability are tariffs threatened by U.S. president-elect Donald Trump, which would put “further upward pressure on pricing of everything.”

 

 

 

 

 

This article was first reported by The Star