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The Canadian housing market is 20% overvalued and needs another round of government regulations to cool it, credit agency Fitch Ratings said Monday.

The statement is sure to add more fuel to the fire about what’s next for the next Canadian housing market which has seen a rebound in sales after a slow winter and new records for price set every month.

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Fitch points to numbers from Canadian Real Estate Association which show home prices grew 7.1% in May on a year over year basis.

“According to Fitch’s sustainable home price model, which measures home prices relative to long-term fundamentals, Canadian home prices remain approximately 20% overvalued in real terms,” the Chicago-based company said in its statement.

It noted building permits have picked up in recent months along with sales, supported by historically low interest rates and those factors are driving up affordability.

Canadian home prices remain approximately 20% overvalued in real terms

Fitch also said household debt to disposable income, which reached a record high of 164.1% in the third quarter of 2013 before declining the next two quarters, is making the market “more susceptible” to shocks from higher unemployment or interest rate increases.