How real estate feeds the economy

Think about the Canadian economy for a second. What comes to mind? Oil? Agriculture? Mining? Those things are important, sure, but not
quite as important as real estate. Housing is behind a lot of the country’s
GDP growth over the past few years. First, we need a brief history lesson. Back in 2008 when the global recession hit, the Bank of Canada slashed interest rates
to juice the economy. That lowered the cost of borrowing money—especially
for mortgages. So, Canadians took advantage of cheap rates,
and plunged into the housing market. Real estate and related industries now account
for about one-fifth of the country’s GDP. Other areas of the country’s economy haven’t
been doing so well. The price of oil took a dive a few years ago
and hasn’t really recovered. The manufacturing sector is in trouble for
a lot of reasons, including foreign competition. That means real estate—and just about every
other industry it touches—has been growing faster and with more consistency, than most
other parts of the Canadian economy. It might not be obvious at first, but when
you buy a home, you cross paths with a dozen different professions. First, you need a home
to buy. Building new houses and condos in Canada is a huge business.
Residential construction has outpaced all other forms of construction in the country,
adding about $47-billion to Canada’s GDP. Just look at Toronto.
There are more condo units under construction than at any point since 1990. That keeps a lot of carpenters, plumbers and drywallers in business. Right now, there are more people employed in the construction industry than ever before. Next, you’ll need a mortgage. The country’s
big five banks are more than happy to provide one. Residential mortgages are a healthy profit-centre for the banks, and the size of their portfolios
has ballooned. Each bank holds anywhere from
$100 billion to $200 billion in mortgages. You’ll need home insurance, too, and maybe insurance for the valuable stuff you keep inside your home. That’s good for insurance companies. To actually buy that house, you’ll probably
need a real estate agent, a mortgage broker, a lawyer, and maybe a home inspector. All of these people need to be paid, too. In 2017, the fees associated with buying and
selling real estate hit 1.9 per cent of GDP. That’s an all-time high. Finally, once you move in, you’ve got to
furnish the place. Maybe you’ll buy new appliances, update
the wiring or fix the roof. You could even employ contractors to totally
gut and renovate the place. Once you buy a home, you tend to spend money
on it. That doesn’t really stop, either. When home prices are rising, people feel richer,
and they’re more likely to spend money. That’s called the wealth effect.
Researchers have done studies to find out how strong the link is between rising home
prices and consumer spending. In Canada, it’s fairly strong.
So, as home prices have risen over the past decade, so too has consumer spending. If you own your home for long enough, you
can even use it as an ATM to spend even more money. A home equity line of credit, or HELOC, lets you borrow money against the value of your home. It’s been a very popular loan with Canadians. The value of outstanding HELOC loans
soared 500 per cent since the year 2000 to more than $200 billion. It’s important to remember that while real
estate boosts the economy when times are good, it can really be a drag when things are bad. Everything we’ve just talked about, consumer spending, borrowing, new home construction, can all be pulled down if the real estate market
takes a hit. Given how important housing is right now, let’s hope that doesn’t happen.


  • BombasticLove87

    Commerical Real Estate is even more important because that determines the growth in jobs in municipalities where people buy homes.

  • the Unrepentant

    Predatory land strategy was devised to facilitate redemption by the inheritors. The astronomical price of shelter comes from robbing present and future generations of their lifetime earnings.

    Over the previous several decades a variety of spurious pretexts were employed to place a halt on the further use of land. The price of homes in Vancouver, for example, rose from $12,000 to $3,000,000 from $27,000 to $4,000,000 and from $59,000 to $10,000,000. (A three-bedroom home in Detroit costs $15,000). A home in Vancouver that should cost $230,000 based on earnings level combined with inflation is offered for $5,000,000. Average sales price in Vancouver in 1969: $23,939.

    Citizens are taking the bait.

    If it sounds too good to be true, it likely is.

    While we have abundant land it has been placed off limits for use in housing. Agricultural land on which no crops can grow. Farmhouses of 1000 sq. ft. replaced with 40,000 sq. ft. mansions and land is left fallow. A tiny nine-acre farm recently sold for $9 million. Forest that you can follow for 1000 miles northward and 3000 miles eastward. A mile at the forest edge over a short distance near major cities would eliminate the housing issue permanently. Organized opposition puts a stop to each attempted use of land. Local regulations with unattainable requirements and excessive delays serve as a barrier to prevent new home construction. These have caused home prices to escalate beyond reach. Their true objective is to consolidate ownership and concentrate wealth into fewer hands.

    The property needs of a growing population were ignored and a disproportionate amount was declared parkland and forestland. Those most affected unwittingly tighten the snare on their own demise. A generation that had everything was determined that those that followed afterwards should have nothing. Don’t touch that tree. That all homes and farms with the exception of those on the prairies are on forestland that was cleared is conveniently ignored. Farmland is saved by making forest land available for housing.

    Homeowners are multi-millionaires, but cash broke. They must slave to retain their homes. If they sell, their heirs become slaves. To realize cash they may borrow on their equity, which means their property must be sold to repay loans and deferred property taxes upon winding-up of their estates. Ownership by individuals is ending.

    Rhetorical question: Where and how is the property tax money from what are now multi-million dollar properties that were formerly in the tens of thousands range, or 180 times their former value, being invested? Civic maintenance costs might have doubled or even tripled during that time, but are not 180 times their former level. Is this excess money being siphoned/gifted out of the country on the pretext of “investing” in the equivalent of “municipals” that return $3 of capital in forty years time for each $100 spent to acquire them turning Canadians into vassals of a foreign state?

    A deliberately created artificial shortage has resulted in a multi-million dollar gulf to home ownership. Foreign purchases, a convenient scapegoat, is a visible symptom that exacerbates the issue, but is not the source. With no prospect of ever becoming established couples have stopped having children. The sense of fulfillment gained from home improvement and the legacy they will pass on to their heirs is absent when living in an apartment. Consumerism fails to fill this purposeless void so they seek escape in Islam. They serve the corporation, die in debt and building their home is relegated to the afterlife.

    Immigrants unaware of the impossibility of achieving the Canadian dream arrive to fill this gap.

    A few large corporations will end up owning all homes. Astronomical home prices justify corresponding rents. Rent absorbs as much as eighty percent of employment income and now exceeds pension income, serving as an abject reminder that citizens are victims of their misguided policies formulated without vision.

    Homelessness and drugs decimate the underclass and middle class. (Homeless count in Vancouver: 3605). While the numbers are still low at about 100 deaths per month in Vancouver, for example, they are accelerating. The post-industrial, post-national era is neo-feudalism in which all property is owned by a few wealthy landowners. Rent is their source of income. Government will pay rent for new arrivals, at least for a while. When their benefits expire they are easily replaced from a global pool. Boundaries are redundant.

    Sharia Law is essential in a neo-feudal society comprised of two classes, wealthy landowners that grow richer daily without effort and the remainder that exist to serve their landlords and are separated from them by a multi-million dollar gulf, in order to protect the assets of the former and to keep in check the latter.

    In unending sequence yet another tract of land is “protected” and prevented from use by citizens.

    All of the property on this planet belongs to the chosen few, together with the increase that it yields.

    It is being redeemed.


    In 1969 I earned $7284 per annum that increased to $9180 eighteen months later. A home in Point Grey was on the market for $29,000. An offer of $27,500 was finally accepted. An equivalent home in Winnipeg cost $11,000. Vancouver was an expensive city. Prior to 1972 it was difficult to sell a home and might take two or more years. Then legislation that placed a stop to the use of land turned homes into a commodity and created a virtually monopoly market with monopoly prices.

    (Average sales price of houses in Vancouver in 1969: $23,939.)*

    $27,500/$7284 = 3.8. In 1969 a home cost the equivalent of 3.8 years earnings.
    Today that home is worth $5,000,000 while an equivalent salary is about $60,000.

    Wage rise due to inflation: $60,000/$7284 = 8.2 times.

    Cost of home now in terms of equivalent earnings: $5,000,000/$60,000 = 83.3 times or the equivalent of 83.3 years earnings.

    A price comparison yields: $5,000,000/$27,500 = 181.8 times its former cost.

    The home should cost $60,000 x 3.8 = $228,000.

    With both earnings and inflation taken into consideration $5,000,000/$228,000 = 21.9 times its normal value.

    The market for homes used to be a free market like that for cars and persons at each income level could afford to buy one as homeowners whose income increased moved on to newer, more expensive homes leaving their old homes to be purchased by new entrants.

    * Home prices may be verified from actual transactions for those years at the public library. My example is for Point Grey. A home in East Vancouver cost about $12,000 or less at that time.

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