The cost of buying a home in Canada has hit record highs, and so has the country’s reliance on housing construction to drive the economy.
Bank of Montreal chief economist Douglas Porter published a chart Tuesday showing a massive divergence in the U.S.’s and Canada’s reliance on home construction, following the burst of the U.S. housing bubble a decade ago.
Residential construction in Canada has hit an all-time high above 7.5 per cent of GDP. That’s a greater dependency than during the housing bubble of the late 1980s. In the U.S., that number is just below 4 per cent.
“Both the gap with the U.S. and the level of activity are loud alarm bells for Canada’s market,” Porter wrote in a client note.
Porter earlier this month declared Toronto’s red-hot housing market to be in a bubble.
While some others disagree, the number of industry insiders concerned about a correction in the city’s housing market has been growing as rapidly as home prices, which soared by 27.7 per cent in the past year to an average of $875,983 for all housing types.
“The real estate industry represents 14 per cent of the economy for Ontario. Kill the new condo market, kill the Ontario economy.”
— Toronto real estate developer Brad Lamb
A growing number of experts fear that a housing correction, particularly in Toronto’s large market, could do serious damage to the economy.
Brad Lamb, one of Toronto’s most prominent developers, warned last week that implementing a Vancouver-style tax on foreign buyers could result in a nationwide recession.
Declining home affordability has prompted Ontario’s policymakers to look at measures to cool the housing market, including the possibility of a foreign buyer tax, similar to the one British Columbia put in place in Vancouver in 2016.
But in a Facebook post last week, Lamb warned that such a tax could “precipitate a Canada-wide recession.”
Toronto real estate developer Brad Lamb, pictured…