Rise in housing investment, income but debt service ratio is up

There has been an increase in housing investment and household disposable income according to the latest GDP figures.

Statistics Canada says that investment in residential construction was up 3.2% in the fourth quarter of 2017, following a flat third quarter.

Ownership transfer costs rose 9.3%, indicating increased resale activity, new housing construction was up 3%, while renovations edged down 0.1%.

Outlays on non-residential structures increased 1.3%, driven by a 2.1% rise in investment in engineering structures; while investment in non-residential buildings declined 0.8%.

Overall, the Canadian economy grew 0.4% in Q4, 2017 (in real GDP terms), the same as the previous quarter. Annualized, real GDP grew 1.7%.  Full-year real GDP was up 3% in 2017 compared to 1.4% in 2016.

Household spending was up 0.5%, decelerating from Q3’s 0.9% with financial and insurance services seeing one of the largest gains (1.5%).

Disposable income was up 1.3%, mainly due to wage increases (1.5%) with services leading the gains.

Canadians were saving more as income rises outpaced spending gains. The savings rate was up to 4.2% from 4% in the previous quarter.

However, the rising cost of interest payments (3%), mainly due to mortgage costs, meant the debt service ratio increased to 13.83%.

Source: https://www.canadianrealestatemagazine.ca/market-update/rise-in-housing-investment-income-but-debt-service-ratio-is-up-238596.aspx