Excellent synopsis, Steve. The percentage of employees employed in the housing sector was a travesty because of central banks interest rate policy. This policy meant that resources that could have been invested in the manufacturing sector were subterfuged into granite countertops.
And who gets rewarded for this abject failure? Mr. Carney is now our president. Well done, Canada. You really understand economics.
I'm puzzled by the argument that Canada's been putting too much of our GDP into homebuilding.
First, to improve productivity, we need to increase long-term investment, sacrificing consumption today for greater consumption tomorrow. Homebuilding is a form of long-term investment: when you build a house or an apartment building, you pay for materials and for workers up front, and then you have housing which should last for 60 years or so.
Second, there's a measurement issue. Real estate's contribution to GDP includes rents, which have been driven up by scarcity, especially in the GTA and Metro Vancouver. It also includes the equivalent ("imputed rent") for owner-occupied housing. In other words, housing scarcity (which drives up prices and rents) results in the real-estate portion of GDP being *higher* rather than lower.
Third, the mismatch between housing and jobs in centres like the GTA and Metro Vancouver is a constraint on economic growth. High housing costs translate into low real salaries, which means that employers have a hard time recruiting and retaining workers. How much larger would Vancouver's high-tech sector be if we could hold onto our computer science and engineering grads from UBC and SFU? See also David Schleicher's "Stuck!" He cites an estimate by Hsieh and Moretti which found that land-use restrictions in the US's most productive cities lowered US growth by more than 50% from 1964 to 2009. https://morehousing.ca/stuck
I would argue that to boost Canada's economic productivity, we should be building more housing, not less, especially where housing is most scarce and expensive. Since the 1970s, there's been a clear slowdown in how much housing we're building. https://morehousing.ca/slowdown
Sure, but building more houses is at odds with the decades-long (centuries-long actually) debasement of currencies with all the perverted incentives that entails… the “scarcity” of housing has been a feature not a bug… now, add in a global demographic cliff (except Africa)
However, Bitcoin will likely continue to eat this “markets” lunch! Which is somewhat hopeful for countries that pivot towards it—enabling a soft housing landing
Canada has quite certainly being putting to little of its GDP into Bitcoin (at a gov and population level)
Whoever bought that house for 245 grand back in 2009 did ok. Realtors made out like bandits. Original seller can still afford to buy 4 packs of steak at Costco. This purchase must have ruined someone.
Excellent synopsis, Steve. The percentage of employees employed in the housing sector was a travesty because of central banks interest rate policy. This policy meant that resources that could have been invested in the manufacturing sector were subterfuged into granite countertops.
And who gets rewarded for this abject failure? Mr. Carney is now our president. Well done, Canada. You really understand economics.
Thought experiment:
How would Canada be situated now if the gov (and population!) had actually allocated an even small percentage of wealth towards Bitcoin in ‘22 ?!
I'm puzzled by the argument that Canada's been putting too much of our GDP into homebuilding.
First, to improve productivity, we need to increase long-term investment, sacrificing consumption today for greater consumption tomorrow. Homebuilding is a form of long-term investment: when you build a house or an apartment building, you pay for materials and for workers up front, and then you have housing which should last for 60 years or so.
Second, there's a measurement issue. Real estate's contribution to GDP includes rents, which have been driven up by scarcity, especially in the GTA and Metro Vancouver. It also includes the equivalent ("imputed rent") for owner-occupied housing. In other words, housing scarcity (which drives up prices and rents) results in the real-estate portion of GDP being *higher* rather than lower.
Third, the mismatch between housing and jobs in centres like the GTA and Metro Vancouver is a constraint on economic growth. High housing costs translate into low real salaries, which means that employers have a hard time recruiting and retaining workers. How much larger would Vancouver's high-tech sector be if we could hold onto our computer science and engineering grads from UBC and SFU? See also David Schleicher's "Stuck!" He cites an estimate by Hsieh and Moretti which found that land-use restrictions in the US's most productive cities lowered US growth by more than 50% from 1964 to 2009. https://morehousing.ca/stuck
I would argue that to boost Canada's economic productivity, we should be building more housing, not less, especially where housing is most scarce and expensive. Since the 1970s, there's been a clear slowdown in how much housing we're building. https://morehousing.ca/slowdown
Sure, but building more houses is at odds with the decades-long (centuries-long actually) debasement of currencies with all the perverted incentives that entails… the “scarcity” of housing has been a feature not a bug… now, add in a global demographic cliff (except Africa)
However, Bitcoin will likely continue to eat this “markets” lunch! Which is somewhat hopeful for countries that pivot towards it—enabling a soft housing landing
Canada has quite certainly being putting to little of its GDP into Bitcoin (at a gov and population level)
*too
This is an excellent piece! Conforms to the recent publication I just posted on my end.
https://divistockchronicles.substack.com/p/why-return-to-office-mandates-are
Thanks, Steve!
Interesting also to note, on that Surrey property, that despite 30%+ drawdown, it looks like property tax actually went up between ‘21 and ‘24
Whoever bought that house for 245 grand back in 2009 did ok. Realtors made out like bandits. Original seller can still afford to buy 4 packs of steak at Costco. This purchase must have ruined someone.