Being a modern-day Canadian isn’t easy on the wallet. Canadians have some of the highest levels of household in the entire world, according to a study released by the Organization for Economic Cooperation and Development (OECD).
Surveying the household debt of 35 different countries, those labelled as developed and developing, the OECD’s preliminary report (the entirety is to be released next month) found Canadians to suffer from high rates of indebtedness.
Actually, Canada placed highest when it came to household debt.
“While higher indebtedness does not necessarily imply that problems are just around the corner, it does increase vulnerability to shocks” explains the OECD report.
For the most part, mortgages and loans are the largest contributors to household debt. Given Canada’s hot housing market, especially in certain cities, it’s not all that surprising Canadians are racking up debt.
"OECD countries that have experienced the strongest increases in household debt since the crisis have also the steepest rise in house prices" notes the OECD.
Unfortunately, Canada’s reliance on the real estate sector puts the country, and its citizens, in a precarious economic position.
While Canada may be making economic strides thanks to certain industries, the high levels of household debt “may entail significant risk to financial stability, given the direct exposure of the financial system to the housing market,” said the OECD.
In other words, if the housing market crashes, we’re in big trouble.
Currently, and according to the OECD, Canada’s household debt versus GDP ratio is at 101%.
Behind Canada, South Korea had the highest ratio at 93%, with the U.K. coming in at third with a bit above 88%.
The United States came in at 80%.