High number of unsold units in construction phase pose 'elevated' risk to economy.

The Bank of Canada is warning that certain overheated segments of the housing market could put Canada's economy at risk and has again singled out Toronto's condominium market as an area of particular concern.

In its latest assessment of Canada's financial system, the central bank said that imbalances in the housing market and high levels of household debt still pose an "elevated" risk to the stability of the Canadian economy and are the two biggest risk factors on the domestic front — with the eurozone crisis presenting the biggest threat internationally. 

It said that while house prices have stopped rising in most major urban areas and housing starts, resales and overall housing demand have slowed, there are still signs of overbuilding and overvaluation in some parts of Canada's housing market.

"House prices are high relative to income … and the total number of housing units under construction remains significantly above its historical average relative to the population," the bank's report says.

Almost all of that construction activity is in the area of multiple-unit dwellings of the condominium variety.

The bank's assessment of the housing market echoes that of the Organization for Economic Co-operation and Development (OECD), which last week issued a report that identified Canada's housing market as one of the three most overvalued among advanced economies.

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