more often, demand for housing is cooling off after a period of historic strength,” an economist at Canadian Imperial Bank of Commerce, Royce Mendes, said in a report on Friday (23 July). “As a result, we do expect this component of GDP to come back down to earth.”
However, he added that employment in the housing industry is not likely to take a hit, while home prices aren’t factored into residential investment. This means a cooler housing market may soften the industry’s contribution to the economy, but not enough to be considered as a major concern. On the other hand, business investment, which has been a key component of gross domestic product, is likely to pick up over the coming months as vaccine reopening continue to instil confidence among the people.
Mendes noted that while a sharp decline in house prices is a financial stability concern, yet, there is not much to fret about from a macroeconomic standpoint. “The reopening that is underway also seems to be coinciding with a slowdown in other components of residential investment,” he wrote. “But, by that same token, companies not doing business in the housing market might also feel more confident making investments rather than stockpiling cash, given that vaccinations have reduced the likelihood of another round of harsh shutdowns.”
