Housing market may need more policy tightening says OECD

by Steve Randall22 Nov 2019

Canada’s economy has some positives but there are also challenges ahead from weak business investment and global trade, the OECD said Thursday.

In its latest Economic Outlook, the organization said that these two factors are widespread in the global economy and must be addressed to avoid damage to long-term growth.

For Canada, it expects a slower pace of growth and, although it will remain low, growth in the labour market will also weaken. Employment growth has been helping to drive incomes higher.

The housing market still has some potential risks, the report says. As markets rebound, there is a danger that the weak supply of available and affordable homes will drive up prices.

The OECD says that these supply issues must be addressed and the housing market must be monitored to assess whether it may be necessary to tighten policy measures.

Household debt has shown some improvement though. The report says that, while household debt remains high and is still a major vulnerability, there are signs of households deleveraging and the pace of household credit growth has slowed.

The report warns that a sharp economic downturn could lead to a drop in housing demand, but conversely there could be a further increase in imbalances should house prices surge.

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