When one of the real estate industry’s largest lobby groups, Mortgage Professionals Canada, released a report last month analyzing the state of the country’s housing market, it found, to absolutely no one’s surprise, zero evidence of a bubble that would warrant political intervention. “Now that the energy sector is no longer a major economic driver, a healthy housing sector is even more essential,” the organization’s chief economist, Will Dunning, warned in a statement. “It would be tragic to unnecessarily impair this key economic force.”
If that sounds like a ransom note, it more or less was: do anything to jeopardize the housing boom, bub, and the economy gets it. Obvious self-interest aside, Dunning and others who have issued similar warnings are right, to a point. Canada’s economy is hostage to the housing market. Rising house prices and the accompanying wealth effect, courtesy of ballooning equity lines of credit, have kept the economy from faltering as business spending retrenches and exports disappoint—last year real estate was by far the largest contributor to GDP in seven of 10 provinces, including B.C. and Ontario.