Canada’s overheated housing market is hurting our economy, an IMF report says.
The International Monetary Fund (IMF), an organization of 188 countries working to secure global financial stability, released a report this week with recommendations on how Canada should enhance its financial strength.
While it notes that Canada has done remarkably well in the aftermath of the 2008 financial crisis in comparison its G8 peers, the report also says Canada needs to watch its inflated housing markets and high levels of household debt.
Canada’s economy is highly concentrated on its banking system. Comprised of a few large players including TD Bank and Scotiabank, our banks’ conservative business models, particularly when it comes to mortgage lending, are depended on for steady exponential profit, the IMF said in the report.
The price of a home has gone up more than 60 per cent nationwide since 2000. The hot housing market in Toronto and Calgary are partly to blame for the surge in house prices as well as Vancouver, which was recently ranked the second least affordable city in the world after Hong Kong.
Household debt has also increased remarkably over the past decade to over 150 per cent of disposable income — one of the highest among other nations in the Organization for Economic Cooperation and Development like Brazil, Austria or UK.
But there are signs that the housing market is cooling off. In Alberta, recent numbers show the number of homes on the market are rising steadily.
The IMF report suggests that Canada could benefit from “reforming the government’s role in mortgage insurance,” “reducing the taxpayer’s exposure to the associated risks” and practicing to respond to crises scenarios to develop better preparedness for times of financial stress.
