Canadian capital is heading south—literally. Real estate transaction dollar volumes fell in May, an ominous start to the year’s busiest season for homebuying, according to CREA. At the same time, Statistics Canada (Stat Can) data shows investors pumped a record amount into US stocks that month. While policymakers double down on real estate investment incentives, capital is quietly fleeing to foreign markets. This is a problem that should be addressed sooner rather than later, since it’s difficult to ground capital flight once it takes off.
Canadian Real Estate Transaction Dollar Volumes Have Plunged
Despite sky-high prices, Canadians are putting less cash into real estate. The dollar value of home sales fell to just $34.2 billion in May, down 6% from last year and 27% lower than the month’s record back in 2021. Still higher than 2019, but the weakest May since 2020—when lockdowns were still freshly implemented.
Canadians Set A New Investment Record For US Stocks
Canadians are looking to American stocks to build their wealth these days. Canadians increased their net position in US stocks by $14.2 billion in May, more than 4x the volume last year. It was 88% higher than the previous cycle peak in May 2021, and the biggest net increase for the month on record. Only 6 months in the past 37 years of data have seen larger net increases—just one prior to 2020, and most within the past two years.
May net investment in US stocks was typically minimal—often negative—prior to 2020. Pulling out of volatile American markets and reallocating the capital into Canadian investment properties was nearly a national pastime.
Canadians Are Spending Less On Real Estate, Investing More In US Stocks
May Canadian real estate transaction dollar volume vs net change in Canadian investor positions in US securities. In billions of Canadian dollars.
Source: Statistics Canada; CREA; Better Dwelling.
There are quite a few takeaways from this monumental shift. Real estate is often discussed as a near risk-free, well-returning asset by Canadians. Just 3 years ago, Canadians spent over $21 on real estate for every $1 pulled from US stocks. Now, they’re putting $1 into stocks for every $2 spent on housing—flipping the capital flow, and placing much more emphasis on foreign investments.
Capital outflows are a significant issue that can be hard to stem once the tap starts flowing. They drain domestic investment, weaken economic growth, and slow productivity—a “crisis” the Bank of Canada (BoC) has repeatedly warned policymakers about. At the same time, it also applies downward pressure on the currency, increasing borrowing costs and signaling eroding investor confidence in the market.
However, the most important signal it’s sending is that Canadians have significant capital to invest, but they’re failing to see domestic opportunities outside of the real estate-centric economy. Recent demand-incentives—such as increasing maximum amortizations, extending amortizations, and sinking hundreds of billions to expand housing investment—are sending the wrong signal.
Canadian investors aren’t the only ones looking to US capital markets, with some big names shifting their positions. One notable example is Shopify, Canada’s second-largest company, which recently listed a second American headquarters to tap US investment. Another is Brookfield Asset Management, which moved its headquarters at the end of 2024 to better position itself for institutional investments.
English (US) · 