Canada's residential real estate market may be primed for collapse, with national prices now approximately 20 per cent overvalued in real terms, according to a new analysis, reports

Owing to government policy and the strenght of the economy coming out of the 2008 economic downturn, Canada has had less exposure to risky mortgage products than the U.S. or other global markets, says the report from Fitch Ratings.

As a result, Canadian home prices are expected to remain flat or experience a slight drop in 2014, despite the current overvaluation. The report also notes home prices have been on the rise for more than a decade, except for a brief drop in 2008.

In addition, a record number of new builds are currently under construction, and consumer debt levels have risen to keep pace with price increases. 
But despite low mortgage rates across the country, affordability is weak. This is due to prices that have grown quicker than household incomes and Canada's GDP over the last decade. Thus, price-to-income ratios are currently at record levels.

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