There’s a 30 per cent chance of a Canadian housing bust according to a new research note from Goldman Sachs.

The bank bases its assessment on a decrease in home prices of 5 per cent or more, adjusted for inflation. It looked at G10 nations and Canada was second behind New Zealand for the most overvalued home prices.

The study says that Canada has been overbuilding homes especially in Alberta and Saskatchewan, which have since seen a downturn in market activity due to the oil slump.

Goldman Sachs also highlights the high level of household debt in Canada, and the other ‘at risk’ nations which also include Sweden, Australia and Norway.

While acknowledging that the debt is currently manageable due to low interest rates, the bank warns that it could mean trouble in the future.

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