The Canadian economy has been suffering due to the collapse in oil prices which is a result of the recent surplus of oils caused by the sudden influx of oil-producing countries and companies. With the unexpected downward curve of oil prices, Canada's economy is now standing and being supported by only one sector: the real estate.
"It is concerning to see that degree of concentration coming from one sector," said Brian DePratto, economist at Toronto-Dominion Bank. "This underscores the importance of real estate to Canadian growth, and also reinforces how key of a risk the real estate sector is for the Canadian economy."
The sudden downfall of Canada's economy can be observed in the goods-producing sector that experienced a 2.6 percent year-to-date decrease through November. On the other hand, the service producing sector has shown an increase of one percent.
The real estate industry in Canada is accountable for the 12 percent of the gross domestic product of Canada through November, as a result of its gains in 2015.
Bloomberg reported that the real estate industry in Canada has been overvalued by as much as 30 percent, according to the Bank of Canada.
In the December Financial System Review of the Bank of Canada, policy makers in Canada said that the two key vulnerabilities to the financial systems are the high level of household indebtedness and the disproportion in the housing market, according to a December report by Bloomberg.
"Certain vulnerabilities are still edging higher, but recent changes by Canadian authorities to the rules for mortgage financing will help to mitigate these risks as we move into 2016," said Governor Stephen Poloz. "Housing activity should stabilize in line with economic growth, as the driver of growth in the economy switches from household spending to non-resource exports."
According to the report from LINK, the real estate market of Canada in 2016 will be determined by various factors including oil prices, low Canadian dollar cost, borrowing cost and foreign investors.