Ontario's fiscal watchdog says rising house prices combined with high levels of household debt could slow economic growth in the province over the next several years.

"Everyone should be concerned about the state of the housing market," Stephen LeClair, Ontario's Financial Accountability Officer, told reporters Wednesday at Queen's Park.

"The Toronto market is always a concern," he said.

"It's not just whether there will be a housing market collapse. We don't know if that is going to happen. Nobody knows. At some point, consumers will have to start to manage their debt loads."

He said if housing prices continue to rise, consumers will most likely begin to reduce their spending. And he said that would mean "less investment" in real estate.

In his report, LeClair identified rising house prices, along with high levels of household debt, as a "key risk" for the Ontario economy.

"An unexpected sharp increase in interest rates or unemployment could lead to a housing price correction that would negatively impact household spending and residential construction, leaving to further job losses," it reads.

Ontario's financial accountability office, however, predicts "solid growth" for Ontario with real Gross Domestic Product rising by 2.5 per cent in 2016 and 2017. After 2017, economic growth is forecast at a more moderate pace with an average of 2.2 per cent per year through to 2020.

The report says other risks to the economy include slower than expected U.S. economic growth, which could affect demand for Ontario's exports, and slowing Chinese economic growth, which could lead to more swings in commodity prices and continued volatility in financial markets.

LeClair says his office's economic projections are based in part on the outlooks of three organizations: the Conference Board of Canada, the privately run Centre for Spatial Economics in Milton, Ont., and the Policy and Economic Analysis Program at the University of Toronto.

He says the outlook is consistent with the general view among economists that strong international exports and business investment will drive growth in Ontario over the next several years.