The projected strengthening of Canada鈥檚 economic growth over the next two years could be thrown off course by a potentially 鈥渄isorderly鈥� housing market correction, especially in the Vancouver and Toronto real estate markets, a new report from the Organisation for Economic Co-operation and Development warns.
that Canada鈥檚 economy will increase to 2.3 per cent in 2018, from 1.2 per cent in 2016. But, while non-energy exports, business investments and an increase in private consumption are expected to lead that growth, the OECD says a major housing market correction is the 鈥渕ain downside risk鈥� to those projections.
The 鈥渙ver-valued鈥� Toronto and Vancouver markets are the most likely targets, the report says.
鈥淭his could result from an external shock that results in higher mortgage rates and/or unemployment, making it difficult for some financially stretched households to service their mortgage commitments,鈥� the OECD says.
Such a correction would reduce residential investments, private consumption and, 鈥渋n an extreme case could threaten financial stability,鈥� it says.
The good news, according to the OECD, is that Canada鈥檚 economy is growing steadily outside the oil and gas sector. The report says that individual spending is 鈥渞obust,鈥� thanks partly to the introduction of the income-tested, non 鈥搕axable Canada Child Benefit in July. The report also notes continued investments in real estate developments, booming house prices in Ontario and British Columbia and an upturn in exports and business investments.
Overall, the OECD offered a positive world economic outlook, buoyed by activity and planned stimulus efforts in the United States and China.
The OECD raised its forecasts for global growth to 3.3 per cent for next year, up from 3.2 per cent in its previous outlook.
With files from The Associated Press
