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Canada’s Housing Boom Is Threatening the Canadian Dollar — Economy Too Dependent on Real Estate?

667 views · Published 28 December 2016 · 5:01 · Indexed 28 October 2026

Channel: Mike Martins · 2016 · News & Politics

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In this 2016 Vancouver Housing Crisis update, I’m looking at another warning sign surrounding Canada’s enormous housing boom: could the country’s dependence on real estate eventually start weighing on the Canadian dollar and the wider economy?

The article I’m discussing argues that several forces are putting pressure on the Canadian dollar, including a stronger U.S. dollar, higher American interest rates and weaker Canadian economic data. But another concern is beginning to emerge — expectations that 2017 could finally bring an end to Canada’s nearly decade-long housing boom.

One statistic in this article really stands out: roughly 7% of the Canadian economy is described as being connected to housing-related activity. That raises a much bigger question. What happens when an economy becomes increasingly dependent on people buying, selling, financing, constructing and renovating increasingly expensive homes?

Vancouver is especially important to watch. Detached-home prices have risen enormously, while incomes have failed to keep pace. Royal LePage is discussing the possibility of a double-digit decline in Vancouver prices during 2017, while Toronto could potentially experience much flatter conditions as recent government measures begin working through the market.

But there’s another side to this story.

If the Canadian dollar continues weakening, Canadian property becomes cheaper when measured in foreign currencies. Could that bring additional international capital into Vancouver, Toronto and other Canadian cities and keep prices elevated?

That makes forecasting this market extremely difficult.

I’ve been saying repeatedly that Canada needs manufacturing, production, exports and productive economic activity. Housing can be part of an economy, but what happens when housing itself becomes one of the major engines keeping economic growth alive?

Going into 2017, that may become one of the biggest questions facing Canada.

Comment below: Is Canada becoming too dependent on real estate? Could a weaker Canadian dollar actually bring another wave of foreign investment into housing?

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