Canada's finance minister has moved to play down fears of a sharp correction in the country's housing market, telling CNBC that while he was monitoring the rising prices closely for signs of overheating, he was "not especially worried."
"We're looking at the housing market, it's of course an issue that we have to be concerned about," Joe Oliver, Canada's finance minister said.
"I'm monitoring it regularly, but the Bank of Canada as well as the Central Mortgage and Housing Corporation, which is the organization that insures most of the Canadian mortgages (about 70 percent) both feel we're looking at a soft landing."
Canada's housing market never experienced the same real estate crash that the U.S. did from 2007. Instead prices continue to post new highs along with a surge in household debt. Economists are split on the extent at which this could unfold in the country in the following years.
Goldman Sachs has predicted a "large correction" if the elevated level of homebuilding persists in coming years. A boom in construction has coincided with the price rises, but the investment bank warns that this could accentuate a move lower with fears of oversupply. Other economists are more optimistic, believing that the real problems are only concentrated in the luxury condominium sector that is located in built-up areas like in Toronto.
National home sales rose 5.9 percent on a month-on-month basis in May, according to statistics released by The Canadian Real Estate Association (CREA) -- the largest such increase in nearly four years. The national average price for homes sold in May 2014 was $416,584, up 7.1 per cent from the same month last year, it added.
The Bank of Canada has warned that this is one of the key threats to the economy, saying on June 12 that the level of risk associated with a sharp correction in house prices "remains elevated."
Oilver said that he wouldn't consider it to be the biggest risk to the Canadian economy, which he said was "doing very well."
"We've emerged from the recession in better shape than most developed countries, we've creating a million net new jobs, our inflation is contained...we're in pretty good shape," he said.
Oliver added that an interest rate shock to the Canadian economy is both "unlikely" and not the biggest threat to markets but instead was "sustained high unemployment."
Oliver also moved to play down the recent moves in the Canadian dollar, which hit a near six-month high against the U.S. greenback on Monday morning. Higher oil prices and inflation figures on Friday - which saw a spike to a 27-month high in May - has helped the currency's rise, but he said that it does not suggest that financial markets think the country has an inflation problem.
"It's pretty obvious if you look at energy prices and our dollar, they relate pretty closely together. So I don't think that when our dollar goes up, it's necessarily a sign that the market is we have a problem. They might be saying quite the opposite," he said.