Canada’s housing market will cool off in coming months, but a U.S.-style housing crash won’t happen, Royal LePage said. (QMI Agency Files)

Canada’s housing market will cool off in coming months, but a U.S.-style housing crash won’t happen, one of the country’s biggest real estate firms said.

Housing prices jumped between 5.7% and 7.8% in the third quarter of the year compared with the same period in 2010, Royal LePage said. Buyers were tempted by low interest rates and the relative stability of the Canadian economy despite global gloom, it said.

"The third quarter saw a return to a normal seasonal business cycle as price appreciation slowed in many areas - with some average values even falling slightly - after the busy spring trading season,” said Phil Soper, Royal LePage president and chief executive. “A broader slowdown is expected in the months ahead but fears of a U.S.-style correction are completely unfounded."

Royal LePage did say prices in some markets are over blown, but the Canadian economy is structured differently from that of the U.S., making a collapse unlikely. Some commentators have predicted Canada’s housing market is set for a major correction, as record low interest rates have spurred buyers to take on more debt than they can afford.

Finance Minister Jim Flaherty also said on Wednesday that Canada is not facing a housing bubble that requires government action.

Asked at a news conference in New York what it would take for Canada to act again to cool the market, he said: “It will take clear evidence of a bubble in the housing market in Canada, which we have not seen.”

He added that measures to tighten mortgage lending that came into effect earlier this year had helped dampen demand.

In the third quarter of 2011, the national average price of a detached

bungalow rose 7.8% year-over-year to $349,974, while standard two-storey homes rose 7.7% to $388,218 and standard condominiums rose 5.7% to $239,300.

The price rises in the third quarter are skewed by the fact the third

quarter of last year was particularly weak, the company said.

The biggest gain was in Vancouver, where two-storey home prices rose 16.9%, as the city continued to benefit from strong demand from foreign investors.

The Toronto market also reported big gains, with the average price rising 9.4% to $518,433, helped by a lack of supply.

Two-storey homes in Calgary and Edmonton were relatively flat, while

Montreal saw a gain of 4.4%, according to the survey.

- With files from Reuters.