Real Estate Propping Up Canadian Economy
According to a recent report released by Statistics Canada, the national government agency charged with monitoring and ensuring that Canadians and the government have access to key economic, financial and environmental data, the national real estate market in Canada is responsible for a large chunk of both provincial revenue as well as national gross domestic product output. In fact, if it was not for the real estate sector – which not only employs those within the real estate sales business but also legal professionals as well as a large section of the construction industry – the economy would have actually shrunk instead of rising by half a percentage point in the month of February this year.
In addition, provincial governments obtain a high percentage
of their revenue through charges such as property taxes, as well as the taxes
placed on real estate transactions. In Ontario for example, the revenue
obtained from just the land transfer tax managed to net over three billion
dollars for the 2016 fiscal year – almost doubling the profit gained from this
tax just three years ago. In comparison, the government of British Columbia has
managed to rake in more than a billion dollars from its own land transfer tax
in 2016, with transfers occurring in the city of Vancouver accounting for over
a quarter of this amount.
Many economists have expressed major concern with these trends, suggesting that any bump in real estate market performance has a very real potential to significantly affect the ability of the both provincial and the federal government to obtain revenue. According to a report penned by the Royal Bank of Canada, just a ten percent drop in property prices nation-wide would be enough to take out a whole percent off national economic growth. An additional issue is the fact that a large portion of Canadian consumers are managing to take on more and more debt as a result of increasing home prices, which means not only requiring the ability to procure a larger mortgage loan, but also an increase in the minimum down payment required.
With Canadian banks loaning more money to
Canadian consumers rather than small and large businesses, it is clear that the
national home market has had a massive impact on not only the national economy,
but also banking practices. Worryingly, this means that any hit on national and
local real estate market will also expose the banks themselves as they take on
more financial risk.
Published Date: Jun 10 2017