OECD: Middle-class households harmed the most by price growth

OECD: Middle-class households harmed the most by price growth

OECD: Middle-class households harmed the most by price growth While a net positive for the industry, the unprecedented level of growth and activity in the Canadian real estate sector is squeezing middle-class families into a tight corner—and might even push them out of the market altogether, the Organization for Economic Co-operation and Development stated.
 
In its latest study, the OECD warned that an unstable concoction of elevated home prices and mounting debt burdens (stimulated by record-low interest rates) is placing working-class households in Canada’s hottest markets at significant risk in the event of a correction or a rate hike, CBC News reported.
 
And while recently implemented changes to federal regulations that govern mortgages could have a moderating effect on Vancouver and Toronto, the OECD maintained that “regionally focused measures” would be more helpful in dealing with the nuances of each city’s affordability crisis.
 
The Canadian economy—which the OECD predicted to see 1.2 per cent growth this year and 2.1 per cent in 2017—would especially benefit from the federal fiscal stimulus plan, which is expected to “increase federal investment in physical infrastructure, social housing, education and innovation.”
 
“In light of the current context of low interest rates, policymakers have a unique window of opportunity to make more active use of fiscal levers to boost growth and reduce inequality without compromising debt levels,” the OECD said in its report.
 
U.S. president-elect Donald Trump’s isolationist policy drive poses a significant threat, however.
 
“Protectionism and the inevitable trade retaliation would offset much of the positive effects of proposed fiscal initiatives on domestic and global growth,” OECD chief economist Catherine L. Mann cautioned.
 
“It would also likely raise prices, harm living standards and leave countries in a worsened fiscal position. Trade protectionism may shelter some jobs, but it will worsen prospects and lower well-being for many others.”


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