The Organization for Economic Co-operation and Development (OECD) have raised concerns over the rate at which Canada’s economy is growing, given the datum that the real estate market is also growing higher especially in Vancouver and Toronto.
In the year 2017, it is foreseen that the national GDP will rise by 2.8%, which is twice higher than it used to be in 2016. This upsurge is anticipated to come as the consequence of an enhancement in the household wealth; a recovery in the oil and gas sector, the Paris-based think-tank projects, low interest rates and government expenditure.
According to the OECD, the modest development of the federal government’s fiscal outlook will possibly result to the economy realizing full employment. The vacancy rate in the job market is tumbling and the unemployment rate in the country has gone down by half a percentage from last year with more people entering the labor market.
In a recent data publication by Statistics Canada, figures for the month of April exposed that the unemployment rate was at 6.6%, on the other hand this figure is not likely to increase considerably in the coming months
However, the housing situation in Vancouver and Toronto has turned out to be a worry for the OECD, thus they believe that it is consequential that the Bank of Canada increases its interest rates, given the fact that the economy is swelling at a swift pace. The OECD thinks that an increase in interest rates will help bring the housing prices under regulation especially in Vancouver and Toronto.
In an effort to restrain market prices, the provincial governments of both Ontario and B.C introduced several new regulations in an attempt to make housing affordable. However, the OECD articulated that these rules will only have a temporal effect on the housing market.
Trepidations were also raised by the OECD over the surge in rent controls in Ontario, which might have possibly led to the decrease in new home construction. This might not be what the city needs because regulations are meant to provide solutions and not the other way round. A shortage in rental units will also affect the employment rate more over for the poor and millennials.
The OECD went on to propose that an intensification in interest rates or taxes will not effectively cut down on the threat faced by the Canadian economy, as a result of the efforts made to correct the housing market.
J C Loum