Canadian real estate is still one of the biggest drivers of the economy. Statistics Canada (Stat Can) numbers show gross domestic product (GDP) climbed in May. The monthly climb, which was higher than expected, was driven by growth in real estate and construction.

Canadian Gross Domestic Product Rises 0.2% In May

Canada’s real gross domestic product (GDP) made an increase on both a monthly and annual basis. GDP came in at $1.97 trillion in May, up 0.23% from the month before. This represents an increase of 1.37% compared to the same month last year. The monthly increase is higher than analysts had expected. The 12-month change was 29.97% below the median growth rate over the past 5 years. That’s a mixed message on growth.

Canadian Gross Domestic Product Growth

The 12 month percent change Canadian gross domestic product.

Source: Statistics Canada, Better Dwelling.

Real Estate Hits A New High, Over 12% of GDP

Canada’s real estate sector is growing at nearly twice the pace of GDP. Revenues for real estate, rental, and leasing hit $250.69 billion in May, up 0.43% from May. This represents an increase of 2.67% from last year. The segment is now 12.75% of GDP, a little under the all-time peak of 12.92% reached in May 2016. Keep in mind this doesn’t include the financing, and construction of real estate.

Real Estate As A Percent of Gross Domestic Product

Real estate, real estate rental and leasing as a percent of GDP.

Source: Statistics Canada, Better Dwelling.

Construction Jumps From The Month Before

Construction made a big monthly jump, but fell short of last year’s number. Construction reached $137.93 billion of GDP in May, up 0.89% from last year. This represents a decline of of 4.88% from last year. Residential real estate represents $49.62 billion of the amount, up 2.18% from the month before. The growth for this segment is also down 5.57% from last year. Construction made a large contribution to the monthly GDP rise, but was a drag on annual numbers.

Construction As A Percent of Gross Domestic Product

Real estate, real estate rental and leasing as a percent of GDP.

Source: Statistics Canada, Better Dwelling.

Over Half of GDP Growth Was Real Estate and Construction

The real estate and construction industries were responsible for most of May’s rise. GDP increased a seasonally adjusted $4.52 billion in May. Broken down, the growth in real estate rental and leasing accounted for 24.24% of that growth. The increase in construction represented 27.06% of growth, residential construction being over 80% of that number. That was a lot of percentages, but the takeaway is pretty simple. Real estate and construction were 51.3% of the monthly growth in May.

Real estate is still a major driver of the economy, despite the slowdown in resales. Which makes sense, since there’s a record amount of new real estate construction. One headwind to note is that most of these buildings going up were purchased a couple of years ago. Slowing absorption of pre-sales over the past year could present a hiccup in the future.

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