Canada's real estate market may look healthy, but it's showing signs of fraying in certain regions and prices could fall by 25 per cent in the long term.
Economist David Madani says that the market is "surviving for the time being on rapidly rising prices" in overvalued and thinly-traded markets, but regional sales indicate that it's unraveling.
Housing activity and prices are falling in Halifax, while a slowdown is also being observed in markets such as Winnipeg and Victoria.
Of particular concern to Capital Economics is Montreal's housing market, which now faces the risk of a price decline, the report says.
Meanwhile, home prices in Toronto and Vancouver, the most overvalued markets, are holding up for now, though that partly reflects fewer new property listings.
Hogtown's house price inflation is expected to stay close to five per cent in the next few months, while the sales-to-listings ratio in Vancouver indicates that inflation could soften in the near future.
Ultimately, Madani feels that with home prices falling in smaller markets, that it may "only be a matter of timing" before bigger areas take a dive.
The report comes after the Teranet-National Bank house price index showed a large divide between Eastern and Western Canada over the past year.
Prices fell in cities such as Montreal, Ottawa and Halifax, while Toronto and Hamilton were the only markets east of Winnipeg that saw price increases.
Calgary saw an increase of 10 per cent year-over-year, while Vancouver's home prices are up nine per cent in the year up to April.
Like this article? Follow our Facebook pageOr follow us on TwitterFollow @HuffPostCanada