Canada's Housing Bubble

"It signals that price increases are going to align more with current markets," Pinsonneault said.

Yet September's figures also could signal that the decade-long surge in residential real-estate values has come to a close, said Pinsonneault, adding it is a wake-up call to investors expecting outsized returns from future real estate purchases.

Housing has nearly doubled in value over the past decade, often gaining more than 10 per cent a year, data from the Canadian Real Estate Association show.

Teranet's index shows prices currently rising at an annualized rate of 6.5 per cent a year.

But over the course of the next decade, or possibly longer, Pinsonneault expects prices to appreciate at about three per cent a year, "which is no increase in real terms," once accounting for inflation.

Pinsonneault was skeptical about a recent article in the Economist magazine, warning that Canada's housing market appears more overvalued than it was in America at the peak of its bubble.

Some observers, such as TDBank, have warned housing prices could correct by as much as 10 per cent. Others have voiced concern over the record levels of debt Canadians have accumulated by buying homes and their ability to make mortgage payments once interest rates rise.

While acknowledging housing has become expensive, Pinsonneault discounted the likelihood of a crash, considering the absence of speculative activity and that the market remains fairly balanced.

A correction is possible if interest rates rise, but the more likely scenario is for housing prices to correct slowly over the next decade or longer, the economist said.