Residential investment at lowest quarterly levels since 2010

by Ephraim Vecina05 Dec 2016
Q3 2016 saw residential investment decline by 5.5 per cent annually, despite Canada’s generally positive growth on that quarter.
Macquarie capital markets analyst David Doyle told Bloomberg that this figure stood as the worst quarterly performance in residential investment since 2010, adding that this represented “growing evidence that 2016 will be the year of ‘peak housing’ for Canada.”
Doyle said that this slowdown should be attributed to a proxy for real estate commissions, currently sitting at more than three standard deviations above its long-term average as a share of Canada’s economy. In addition, B.C.’s foreign buyers’ tax might have a lot to do with the decline in this segment.
The market should brace for a weaker Canadian dollar as a consequence of these developments.
“Peak housing in Canada should manifest itself in financial markets via divergent monetary policy and diverging sovereign yields,” according to Doyle, adding that the greenback is set to strengthen to 1.45 versus the loonie by the end of 2017.
The analyst concluded that if these trends continue, real estate would end up being “a significant headwind for 2017 and beyond” for the Canadian GDP.

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