Further to Wilful Blindness, first-quarter GDP data published last week shows that residential ‘investment’ reached nearly 9% of Canada’s GDP while business investment has plunged (both below since 1960).
This is not the stuff of productivity growth. This is the stuff of heavily indebted households that need to spend less and save more (pay down debt and file for insolvency), with economic weakness for years to come, while they do. See Postmortem: Canada is buying too much house:
Australia is often likened to Canada in terms of a small, open, commonwealth economy that also depends heavily on commodity exports. Government policies, subsidies, loose lending and incoming Asian funds (including illicit) have enabled a residential housing boom in both countries over the past decade. Australian cities often show up alongside Canada’s bigger urban centres atop lists of the most expensive real estate on the planet.
Still, as shown below in first-quarter GDP figures published for both countries, Canada (pink bars) wins the malinvestment award overall.
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