Mortgage Watch

A red-hot housing market fueled by cheap money has helped Canada climb out of recession, but fears are growing that it could be a bubble much like the one that brought the United States to its knees.

Household debt is climbing as buyers use record low rates to stretch for previously unaffordable homes in markets like Toronto and Vancouver, where prices hit record highs. Sales have gone through the roof and bidding wars are common.

Yet even as the central bank warns Canadians to plan for higher rates, analysts say factors including housing supply, demographics and lending practices make a US-style crash unlikely.

"I don’t think we’re in a bubble. What we’re seeing is a monetary policy that is working very efficiently," said Benjamin Tal, senior economist at Canadian Imperial Bank of Commerce.

"There is a bit of overexposure, yes ... but a more reasonable scenario is it’s a redistribution of activity -- namely, what we are doing now is stealing activity from the future," he said. "There is almost an urgency to buy a house right now."

The market’s dynamism was highlighted by a report on Tuesday that showed existing home sales jumped 73 percent in November from a year earlier, while the average price rose 19 percent nationally.

There is no doubt that housing prices in some Canadian markets are rising quickly, and that more homes have changed hands this year than even when the market was at its peak in 2007.

But many analysts are wary about calling it a bubble, which would imply that home values have increased too fast to unsustainable levels relative to incomes and other economic elements.

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