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Though it’s not surprising that Canadians are wrapped up in the ups and downs of the national housing market, the international media is also scrutinizing the market’s future in light of October’s new data on housing starts. The Financial Times recently published a story headlined “Canada’s housing market teeters precariously.”

David Madani, economist at Capital Economics, was quoted in the London-based paper as saying the country was on the edge “of what will prove to be a prolonged correction.” The piece also points to a recent report by the Organisation for Economic Co-operation and Development (OECD) that called out Canada’s real estate market as potentially risky. Alongside Norway and New Zealand, Canada was named as one of the countries where “houses appear overvalued but prices are still rising.” These economies are “most vulnerable to the risk of a price correction – especially if borrowing costs were to rise or income growth were to slow.”

However, the Bank of Montreal took a more positive line in their analysis of Canadian housing starts in October. In light of the 1.2 per cent month-to-month boost in starts, they stated their bottom line thusly: “Canadian homebuilding keeps on ticking, but there’s not much here to overly concern policymakers yet.” (Tweet this)

Though Finance Minister Flaherty has sounded the alarm on the runaway housing market in condo boom towns such as Toronto in the past, his current take on the market isn’t so bleak. Late last week, he told media he doesn’t see “bubble-like indicators” in the Canadian housing market.” Though he did add that “we have to be careful that we don’t get an artificial increase in prices, a bubble, because of speculation.”

TD Economics’ take on the October housing starts was similarly measured, pointing out that the new numbers were defying odds. In the news release, they went on to say “the renewed strength in the housing market is not expected to continue for much longer, as many of the largest markets in Canada are overbuilt. The 6-month trend of homebuilding is encouragingly 9 per cent down from last year.”

The bank also pointed out that the demographically supported levels of new home construction is in the range of 175,000 units. In the news release, Research Associate Sonny Scarfone said, “We expect that level to be reached by the end of 2014, with a potential undershoot as markets absorb the current levels of overbuilding.”

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