An international economic body says Canada’s urban housing markets are overvalued, making owning a home too difficult for many Canadians and increasing inequality.
In the first major survey of the Canadian economy in two years, the Organization for Economic Co-Operation and Development takes particular aim at risks in the housing market, while also chiding the country's environmental record, the oilsands and skills training.
The report — which contains a dedication to the late finance minister Jim Flaherty from the group's secretary general, Angel Gurria — is mostly complimentary about the state of the Canadian economy which it says is doing relatively well with expected growth rates of 2.5% this year and 2.7% in 2015.
But it criticizes Canada for the increasing unaffordability of housing in big cities like Vancouver, Toronto and Calgary, saying high household debt leaves families vulnerable to interest rate hikes.
Given such risks, the OECD wonders why the government allows Canada Mortgage and Housing Corp. to insure 100% of high-leverage mortgages when most other countries limit potential losses to 10% to 30% of outstanding balances.
Finance Minister Joe Oliver has come under pressure to intervene in the market after recent moves by Canadian banks that have taken five-year fixed rates below 3%. But, speaking in New York, the minister downplayed the danger saying rates had not come down very much.
The OECD warns that inequality is rising in Canada and that it is increasingly becoming a two-speed economy, as Bank of Canada Governor Stephen Poloz has described it, with resource-rich regions doing well at the expense of other regions.
