Canada Household Debt Surpasses GDP Highest Among G7 Nations Blamed on Soaring Home Prices

Image by: unsplash

According to data from Canada's housing agency, household debt in Canada has reached the highest level among G7 countries, surpassing the country's entire GDP. The Canada Mortgage and Housing Corporation attributes this escalating debt to high home prices. The agency warns that this situation leaves the Canadian economy vulnerable to global economic crises, making it difficult for Canadians to weather a recession. The report reveals that 75% of Canada's household debt is due to mortgages, and as home prices continue to rise, household debt follows suit. To address this issue, the deputy chief economist suggests that restoring housing affordability is crucial for reducing household debt and enabling Canadians to become homeowners.

The average home price in Canada is reported to be C$716,083 ($528,000; £426,000), while major cities like Toronto and Vancouver have even higher average prices. Both cities consistently rank among the top 10 most unaffordable cities in the world. Since 2011, the average value of Canadian homes has more than doubled. In 2021, Canada's household debt exceeded its GDP by 7%, marking an increase from the past when household debt was lower than the country's GDP. In comparison, household debt in the US and the UK has decreased over the past decade, with the US at 75% of its GDP in 2021 and the UK at 86% in the same year.

The Canadian government is facing pressure to address the issue of housing unaffordability. In response, a two-year ban on foreigners purchasing homes in Canada has been implemented to alleviate the situation. Calls have also been made to increase the housing supply to accommodate the country's growing population, which grew by over a million people in 2022. Without addressing the housing affordability crisis, Canada's household debt is likely to continue increasing, contrasting with the decreasing trends seen in other countries like the US and the UK.

Read the full article on: BBC