Chart of the Week
Real Estate Reliance
by Mike Hayhoe
The 2 Canadian provinces, BC & Ontario, have an inordinate reliance on Real Estate and Residential Construction as drivers of our economic growth.
If these should falter, watch out.
These charts and the quote below are from a brief Bloomberg Article that is worth the read on the possible contagion from the melt down of Home Capital.
"The risk from Home Capital doesn’t stem from its size or linkages -- it holds only about 1 percent of Canadian mortgages and these are on its own books, which limits spillovers. However a disorderly fallout from Home Capital would damage a sector which is driving Canadian growth. Real estate, residential construction and finance sectors were responsible for around two-fifths of output in Canada’s fastest growing provinces."
As you can see below, our Residential investment as a % of our GDP is at all-time highs, much like it was in the late 80's during the last construction boom in Canada.
Let's hope we don't go through as severe contraction as the US did when their residential market came to a screeching halt.
Mike Hayhoe, BSc, CIM® is Branch Manager & Senior Investment Advisor at Independent Wealth Management
Canaccord Genuity Wealth Management, Kitchener, ON