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Should you be worried about Canada’s housing market?

Data released Monday by the Canada Mortgage and Housing Corporation shows new homebuilding in Canada slowed slightly in November. While the numbers suggest the country's robust housing market is stabilizing, TD economics says the new housing market is overbuilt in many large urban centres.

“Even with the monthly retrenchment, the pace of housing start activity remains greater than those supported by demographic fundamentals,” TD economics said in a note to clients.

“Weakness was registered in both the single and multi-categories in November. While concerns of overbuilding are typically discussed in the multi category (e.g., condos in Toronto), it is rare to see softness concentrated to just one part of the new housing market.”

Veritas Research analyst Ohad Lederer tells BNN he has been bearish on housing and housing prices for some time.

“Anybody can look at the market and see that on any measure, real house prices, price to income, price to rent, housing in Canada is very expensive. In some cases, it’s a couple of standard deviations off the mean,” Lederer said. “The question is how long can this persist?”

Lederer thinks housing prices will fall but he doesn’t see a U.S. style drop for Canada, although he is concerned that a correction in the condo market could have a trickle-down effect on the financial health of amateur landlords and real estate speculators.

“It’s unsustainable to have forever increases in household debt and house prices. And so I don’t know if [a drop in housing prices] is going to happen in 2014 but I do believe it’s going to happen.”
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