Real estate is bigger in B.C.’s economy than oil is in Alberta’s, but here’s the thing

High-rise condominium towers crowd the False Creek shoreline of downtown Vancouver, B.C. on Tuesday, October 31, 2017. Bayne Stanley/The Canadian Press

Real estate, rental and leasing take up a share of B.C.’s economy that is so large, it eclipses oil and gas in Alberta.

It’s a phenomenon that has arrived at a time of skyrocketing home prices, and has eroded affordability in Vancouver to the worst level it’s ever been.

But should British Columbians be worried that real estate forms such a strong sector of the province’s economy? Not necessarily, if you talk to University of Calgary associate professor of economics Trevor Tombe.

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Economic numbers released by Statistics Canada earlier this year show that the real estate, rental and leasing sector made up an 18.36 per cent of B.C.’s gross domestic product (GDP) last year.

Compare that with Alberta, where mining, quarrying, oil and gas accounted for 16.98 per cent of the economy.

READ MORE: B.C.’s economy to lose momentum: report

“I wouldn’t draw too much from that comparison alone and say that this shows there’s an overdependence in B.C. on real estate or an overdependence on oil and gas in Alberta,” Tombe told CKNW’s Jill Bennett on Sunday.

“I think that’s a separate question, but real estate accounting for so much in B.C. does illustrate a growing trend that we’ve been seeing in that province.”

Statistics Canada has a very specific method to account for economic activity related to real estate.

The numbers don’t necessarily reflect buying and selling so much as growth and property value.

To do this, the stats agency uses “imputed” value in order to put a number on the real estate sector, even if it’s not a market transaction like rent.

“So when house prices rise, and rents rise, we inpute more value to to the housing services that we are enjoying,” Tombe said.

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Tombe was asked whether people should be concerned that real estate, rental and leasing take up a nearly 20-per-cent share of the province’s economy, given revenues from the Property Transfer Tax (PTT) and other measures.

While noting that oil and gas royalties have been larger for Alberta than real estate revenues have for B.C., Tombe said he’s not sure that people need to be too concerned about the overall state of B.C.’s economy, or its reliance on real estate.

However, he did say the B.C. government should be careful not to become too reliant on income from the real estate sector.

“I think some of the lessons we are learning here might be applicable to B.C. as well. Rather than trying to structurally change the economy itself, put in place policies that prepare for a situation when incomes fall. And in BC’s case, it would be income from property.”

He said it was, however, important to note that there are “winners and losers” when home prices rise.

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“Those who do not own a home are not enjoying the increase in their wealth but homeowners are,” Tombe said.

He noted that along with higher home prices, British Columbians are also paying more interest as a share of their income than the rest of the country, at about 7 cents of every dollar earned.

But even that level is down from what it was a decade ago — 10 cents on every dollar.

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