The Organization for Economic Co-operation and Development (OECD) recommends that Canada do more to reduce the risks associated with overheating real estate markets, particularly in Toronto and Vancouver.
Like other international institutions before it, the Organization for Economic Co-operation and Development (OECD) proposes that federal measures introduced in Canada last year be tightened. These include new standards imposed on mortgage lenders and credit insurers.
The OECD, headquartered in Paris, believes that Ottawa should “make greater use of macro-prudential measures, in particular instruments such as the capping of debt-to-income ratios”, which could be more restrictive in the regions Where the housing bubble is more present.
Last week, the International Monetary Fund made the same rhetoric about overheating real estate.
The OECD is also critical of the recent tax imposed by Ontario on foreign-owned real estate acquisitions to combat speculation in Toronto, as did the City of Vancouver in August 2016. Ontario On the other hand tightened the framework of the rents in the province.
“Rising housing prices [in Ontario] are likely to see a short respite, but prices are set to rise again as a result of speculation, while the development of managed rents may discourage the supply of rental housing” , The OECD estimates. “Inadequate rental supply could impede labor mobility (particularly among the most modest and young) and in so doing increase the cost and duration of the process of adaptation to globalization . ”
The federal government has taken several measures over the past few years to address the housing market, including tightening access to mortgage credit, increasing the initial payment on a home and reducing the amortization period.
Doubled growth in 2017
The OECD also believes that Ottawa’s investments in physical infrastructure, social housing, education and innovation will help Canada “adapt to globalization in ways that are both inclusive and efficient”.
“The pressures associated with this adaptation are expected to be stronger in the sectors concerned if the protectionist shift in US trade policy is confirmed,” notes the OECD. In this regard, the organization is talking about the renegotiation of the North American Free Trade Agreement (NAFTA) and the newly imposed countervailing duties on Canadian softwood lumber .
The OECD forecasts that Canada’s gross domestic product (GDP) will grow by 2.8% in 2017 (double the growth of 1.4% in 2016) and 2.3% by 2018. These forecasts include A risk associated with a possible “disorderly correction” of the Vancouver and Toronto real estate markets, the organization said.
“Such a correction would affect residential investment, household wealth and consumption. A sufficiently large shock could even threaten financial stability. ”
For its part, the Bank of Canada raised its growth forecast for 2017 from 2.1% in January to 2.6% in April.
For the United States, this year’s OECD GDP growth is 2.1%, slightly lower than in Canada. Globally, the OECD expects GDP growth of 3.5% this year and 3.6% in 2018, compared with a 3.0% increase in 2016.
The organization also noted that companies and consumers in OECD member countries were becoming more confident and that their labor market and business activities were recovering.
Despite this, OECD chief economist Catherine Mann has argued that “policy makers [should] avoid excessive optimism. According to the group, there are still uncertainties regarding government policies in some major countries and wages are still not growing as much as hoped.