IMF: Canada Needs To Monitor Housing Closely

The same day that Finance Minister Jim Flaherty said he isn’t planning any further action to cool the housing market, the IMF released their Regional Economic Outlook which recommends that Canada may need to do just that.

The report states that:

Developments on the housing front require increased vigilance, and consideration may need to be given to additional prudential measures to prevent a further buildup in household debt

On the domestic front, consumption might moderate more than expected from a large retrenchment in highly indebted households amid concerns of a drop in house prices. The latter are estimated to be above levels dictated by economic fundamentals in some key provinces. On the upside, improved global financial conditions could bolster confidence, supporting domestic demand

While Canada has close linkages to the US, it’s fairing better than its southern neighbor:

Contrary to what is taking place in the United States, labor and housing markets have performed relatively well. Unemployment fell below 7¼ percent in July 2011, and stricter mortgage rules were recently implemented to contain the growth in mortgage credit. Private credit remains strong, reflecting accommodative monetary conditions and a profitable banking system buttressed by strong regulation and supervision. Canadian banks were much less exposed to toxic assets and wholesale funding than were U.S. banks.

You can read the entire report here

Please feel free to post your comment or question

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s