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Ottawa needs to cool down Toronto, Vancouver real estate markets, OECD urges

Home prices in the Greater Vancouver Area jumped 15.8 per cent in June compared to a year ago. In Toronto, prices climbed 12.3 per cent last month.
The Organization for Economic Co-operation and Development says Ottawa needs to introduce measures aimed at reducing some of the risk associated with soaring home prices and household debt levels in Toronto and Vancouver. Credit/Getty Images

TORONTO – The Organization for Economic Co-operation and Development says Ottawa needs to introduce measures aimed at reducing some of the risk associated with soaring home prices and household debt levels in Toronto and Vancouver.

The OECD says in a report issued today that the possibility of a housing market correction, particularly in Toronto and Vancouver, could threaten the country’s financial stability.

“Very low borrowing rates have encouraged household credit growth and underpinned rapidly rising housing prices, particularly in Vancouver and Toronto, which together are a third of the Canadian housing market,” the report said. “In relation to household incomes, both house prices and household debt are high.”

READ MORE: Skyrocketing prices mean entry-level homeowners in Toronto, Vancouver can’t afford to upgrade

Finance Minister Bill Morneau recently increased the minimum down payment for homes over $500,000, a measure aimed specifically at cooling those two markets.

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As of February, borrowers must put down 10 per cent on the portion of a home over $500,000.

Homes below that threshold still require only a five per cent down payment.

But the OECD says more measures should be introduced to reduce some of the risk stemming from soaring house prices and high household debt levels.

It says those measures should be targeted at Toronto and Vancouver, which together comprise a third of the country’s real estate market.

The OECD also called on the federal government to tighten mortgages rules in its last report in December.