Real Estate in Flux: Growth, Slowdowns, and Hidden Opportunities for Landowners
Canadian real GDP rose by 0.2 per cent in December, after declining by 0.2 per cent in November. Goods-producing sectors rose 0.3 per cent, while service-producing industries were up 0.2 per cent. Sectoral growth was led by mining, quarrying, and oil and gas extraction (0.8 per cent), utilities (4.7 per cent), and retail trade (2.6 per cent). Output for the offices of real-estate agents and brokers fell by 6.0 per cent month-over-month. Preliminary estimates suggest that real GDP by industry increased by 0.3 per cent in January.
Real GDP increased by 0.6 per cent in the final quarter of 2024, registering an annualized growth rate of 2.6 per cent. Household spending grew by 1.4 per cent, leading to a 1.0 per cent increase in per capita household expenditures during the fourth quarter. Growth was also driven by strong residential construction (3.9 per cent) and non-residential business investment (0.7 per cent). Canadian trade grew in the fourth quarter, with exports of goods and services (1.8 per cent) outpacing imports (1.3 per cent). Household savings rates fell from 7.3 per cent to 6.1 per cent in the fourth quarter, driven by slower wage and income growth compared to spending, as well as lower investment earnings. On a per capita basis, GDP rose 0.2 per cent in Q4, but fell 1.4 per cent in 2024 overall.
Canada's GDP growth in the final quarter reflects the impacts of lower interest rates as well as temporary relief from the GST holiday on household consumption. This comes in the context of inflation moderating to its target range, with price appreciation being largely driven by high shelter costs. In addition, uncertainty surrounding potential tariffs and their inflationary impacts continue to hamper our economic outlook. This report, although stronger than expected, likely will not sway the Bank in either direction particularly as the impact of likely tariffs takes center stage before the next Bank of Canada interest rate decision.
Economic Performance Charts
Key Takeaways
• GDP Growth Rebounding: After a decline in November, the economy grew by 0.2% in December and 0.6% in Q4 2024.
• Real Estate Slowdown: Offices of real estate agents and brokers saw a 6.0% decline in output, indicating a slowdown in transaction volumes.
• Strong Residential Construction: Residential construction grew by 3.9%, signaling continued demand for housing development.
• Non-Residential Investment Up: Business investment in non-residential buildings rose by 0.7%, suggesting steady commercial and industrial activity.
• Household Spending Increasing: Consumer spending grew by 1.4%, partly due to temporary tax relief, but savings rates declined.
• Lower Interest Rates Supporting Growth: Economic growth was helped by lower rates, which could support borrowing for land acquisition and development.
• Inflation Pressures Easing: Inflation is moderating, but high shelter costs continue to drive price increases, reinforcing the long-term value of real estate.
• Trade Expansion: Stronger exports and imports suggest economic resilience, which could benefit land near industrial and logistics hubs.
• Tariff Uncertainty Looming: Potential tariffs could increase construction costs and impact demand for land and development projects.
• Bank of Canada Policy Unclear: Despite economic strength, upcoming interest rate decisions remain uncertain due to tariff risks.
Implications for Landowners
• The real estate market is experiencing a slowdown, but strong residential construction indicates ongoing demand for developable land.
• Lower interest rates could create buying opportunities, but financing conditions remain uncertain.
• High shelter costs sustain long-term land value, especially for housing projects.
• Rising construction costs due to tariffs could impact development feasibility—timing and cost analysis are key.
• Demand for industrial and commercial land remains steady, driven by business investment and trade growth.
(Source: BCREA. Reprinted with permission.)
