Canada allocates a disproportionately large share of its capital to residential real estate, raising questions about the long-term implications for economic productivity.
According to the data, residential investment accounts for 33.4% of Canada’s gross fixed capital formation, the highest among G7 countries and well above the global average. As a share of GDP, Canada’s housing investment also significantly exceeds peers.
This concentration has consequences. Capital directed toward housing is capital not deployed into productive assets such as machinery, equipment, or intellectual property. As a result, Canadian businesses invest materially less per worker than their U.S. counterparts, and the country has experienced the weakest GDP per capita growth in the G7 over the past decade.
The paper frames housing not simply as a real estate issue, but as a capital allocation problem. The central question is whether Canada’s investment mix is limiting its long-term growth potential by crowding out more productive forms of investment.