Canadian real estate sales contributed to a significant hit to the Canadian economy. Statistics Canada released January’s Gross Domestic Product (GDP) numbers, showing a decline in output across the country. Special attention should be paid to the real estate categories, which are printing the largest declines in years.

Canadian Gross Domestic Product Declines 0.5%

Canada saw GDP numbers decline for the first time in five months. Total GDP reached $1.760 trillion, a 0.12% decline from the month before. The 12 month change is still 2.72% higher than the same time last year. GDP numbers are seasonally adjusted, meaning month-over-month changes are important.

Source: Statistics Canada. Better Dwelling.

Confused whether the decline is a big deal or not? There’s no real definitive answer after just one data point. Although, a decline from December to January is rare, having occurred only twice in the past ten years. The two times it occurred may be telling of the kind of year we’re looking at – 2009 and 2015. Both years saw Canada hit a recession, though 2015 was a barely noticeable blip for most. A recession is defined as two consecutive quarters of GDP decline.

Source: Statistics Canada. Better Dwelling.

Real estate declined 0.5%

One of the largest sectors dragging down GDP was the category “real estate and rental and leasing.” Output for the classification came in at $227.6 billion in January, a 0.49% decline from the month before. The 12 month trend was 2.31% higher than the same month last year. This is the most direct of the categories that make up the real estate portions of GDP.

Source: Statistics Canada. Better Dwelling.

The size of declines are worth noting, since these are multi-year records. The monthly decline is the largest since October 2008. The 12 month change is positive, but the growth is the lowest observed since April 2013. Once again, it’s only one month, but it’s a big change.

Source: Statistics Canada. Better Dwelling.

Real Estate Agents And Brokers See Largest Decline Since 2008

Statistics Canada made a special note regarding the “output of offices of real estate agents and brokers.” Output came in at $10.03 billion in January, a 12.75% decline from the month before. The 12 month trend also showed a decline, with output 6.19% lower than the same month last year. The monthly decline is the largest since November 2008. This is one of the primary reasons for the decline in the “real estate and rental and leasing” category.

Source: Statistics Canada. Better Dwelling.

Statistics Canada attributed January’s real estate losses to new OSFI B-20 Guidelines. The Guideline reduces the maximum size of a mortgage, obtained from regulated banks. That reason doesn’t make sense, since the numbers are seasonally adjusted. Seasonally adjusted output doesn’t necessarily occur in the reported month or quarter. Since the Guideline only applied from January 1, 2018 forward, the output would have been minimally impacted in these numbers. However, don’t let that ruin a simple explanation for a complicated issue.

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