A new report from the International Monetary Fund (IMF) is raising concerns about the stability of Canada’s housing market. According to the global economy forum, Canadian household debt levels are among the highest recorded in Western countries. In fact, over the past ten years, household debt accumulated by Canadians has reached unprecedented levels, surpassing 150 per cent of disposable income.
In a recent article from the IMF, authors Hamid Faruqee and Andrea Pescatori write that “house prices have risen more than 60 percent nationwide since 2000. Major metro areas have led the run-up in prices, including Toronto, Calgary, and Vancouver—the latter recently ranked second in terms of the lowest affordability globally after Hong Kong.”
In order to improve the country’s financial resilience and stabilize the housing market, the IMF recommends the following changes to Canada’s economic policies:
- Taking measures to reform the federal government’s role in mortgage insurance;
- Reducing the associated risks of mortgage insurance for taxpayers;
- Providing an overarching regulatory body to reduce systemic risk to Canada’s economy, thus reinforcing the accountability of policymakers in potential crisis situations; and
- Establishing a coordination framework to test the willingness and capacity of federal and provincial authorities to respond to potential financial crises.