A new IMF staff analysis suggests a national real house price overvaluation between 7% - 20%, however there would be important regional differences.
“After a brief pause, Canada’s housing market rebounded in 2014, fuelled by low and declining interest rates although there are some welcome signs of cooling especially in overheated markets,” the IMF said in its recent report.
Moreover, a soft-landing is predicted by the organization in late November, adding that “a crash could be exacerbated if further lending tightening isn’t implemented.”
Previously, the IMF said an overvaluation of 5% to 20% could be possible, and it reiterated its view that banks should be taking more risks on residential mortgages.
Today, the organization sees Canada’s banks as continuing to perform well.  
 “Canadian banks remain highly profitable, with favorable loan quality, low nonperforming loans, and improving capitalization,” the report states.
“Stress tests suggest that banks are resilient to credit, liquidity, and contagion risks due to their strong capital position, stable funding sources, and low exposures to the energy sector, as well as extensive government-guaranteed mortgage insurance.”

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