Canadians are still real estate fanatics, but the peak was so high, today’s levels seem normal. Statistics Canada (Stat Can) data shows investment in residential structures increased in Q3. When compared as a percentage of GDP however, residential investment is down from the peak. Although it’s still way above usual.
Residential Investment
Residential investment (a.k.a. residential structures in Canada) is real estate’s direct contribution to GDP. It includes construction, renovation, and ownership transfers – but not a comprehensive measure. For example, the renovation part only covers large renovations such as roofs and kitchens. It excludes routine maintenance and superficial upgrades like painting. The segment measures a good portion of real estate, but not quite all. For example, insurance and finance are largely dependent on real estate, but not included here.
Canadian Residential Investment Reached Over $46 Billion In Q3
In current dollar terms, the amount dedicated towards residential investment is growing. Residential investment reached $46.04 billion in the quarter of Q3 2019, up 4.29% from the previous quarter. This works out to an increase of 3.45%, when compared to the same quarter last year. The increase is higher than last year, but the gains are small in contrast to recent years.
Canadian Residential Investment
The amount spent on residential stuctures in Canada.
Source: Stat Can, Better Dwelling.
The year-over-year (YOY) growth is big for a quarter over the past 12 months, but still unusually low. This is the biggest YOY for any quarter since Q4 2017, with most of the recent numbers printing negatives. Even so, this is the second slowest YOY growth for Q3, in the past years. Other than last year, this is slow for the industry.
Residential Investment Is Over 7% of GDP Still
Residential investment as a percentage of GDP is falling, but still elevated. It represented 7.68% of GDP in the quarter of Q3 2019, down from 7.79% from a quarter before. Compared to Q3 last year, it’s a little higher – but some of this appears to be distribution. That is, some quarters in the past year have been slower than usual, and some faster. This becomes apparent when we look at growth over a longer period.
Residential Investment As A Percent of GDP
The amount of Canadian residential investment, expressed as a percent of GDP.
Source: Stat Can, Better Dwelling.
The rolling 12-month trend shows just how dependent Canada has become on real estate. Residential investment as a percentage of GDP is coming down on an annual basis. It most definitely peaked in 2017. We’re still very much above historic norms though. In fact, cheap financing and financial innovations prior to the Great Recession couldn’t even compete with this percent of the economy devoted to real estate.
Canada’s dependence on real estate as a driver for the economy is lower, but higher than it should be. For context, residential investment in the US is below 4 percent today. The US hasn’t breached 7% in over 50 years – even right before the great recession. Canada on the other hand, has been over 7% for almost half a decade now.
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TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
