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A condo development site on the corner of the Upper Lachine road and Wilson is shown in Montreal, Monday, June 17, 2013.

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Canadians should spend less time worrying about housing markets in Toronto and Vancouver and more time worrying about Montreal, Regina, Saskatoon and Winnipeg, suggests National Bank economist Marc Pinsonneault.

Vancouver's overheated prices and Toronto's burgeoning condo supply tend to steal the spotlight, but Mr. Pinsonneault believes that more recent overbuilding of both houses and condos in Greater Montreal, parts of Saskatchewan and Winnipeg deserves more attention.

In fact, he's not really worried at all about Toronto and Vancouver (more on that in a bit).

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Last year the Toronto area absorbed 16,000 new houses (or more specifically what Mr. Pinsonneault refers to as "homeowner units," by which he means homes that are not condos, rentals or co-ops) and ended the year with 260 houses that were newly completed but not bought. The Montreal area, in contrast, absorbed 5,000 houses and ended the year with 712 unabsorbed units.

"It was the eighth consecutive year that ended with Montreal having the greater number of unabsorbed new units, for a population a third less than that of metropolitan Toronto," Mr. Pinsonneault writes. "For almost a year now, the number of [houses or homeowner units] under construction in Montreal, though stable, has been growing relative to absorptions."

And Montreal developers have been building more condos than houses since 2010, even though the number of unabsorbed condo units has been rising, he adds.

Meanwhile, the number of unabsorbed new houses in Regina and Saskatoon, which used to be about 50 per year before the recession, averaged 200 from 2010 to 2012 and the most recent count is about 460 (there was a spike of new construction in 2012 and 2013). The story is similar for condos, Mr. Pinsonneault says. Saskatchewan's builders went into a frenzy when the population began to soar in 2007, and have been slow to put on the brakes.

"In Winnipeg the market for new condo units did not mature until 2007," Mr. Pinsonneault writes. A "wave" of new condos began construction in 2012 and that has continued to the present day. The stock of unabsorbed new units rose from a low of 53 units in April, 2012, to 248 in September.

Outside of those markets, Mr. Pinsonneault is less concerned. Here's the big reason why: homes are taking longer to build these days. That, he says, is a big factor behind the rise in the number of condo units under construction across Canada and in major markets. Construction time is lengthening because interiors are increasingly customized and big high-rise projects are more common.

"The number of condos under construction is inflated by the fact that a single unit stays in the 'under construction' statistics much longer than before," he said in an e-mail. "So a larger number of condos under construction these days does not mean that the monthly influx of completed condos will be larger than in the past."

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A better measure is how many units are not being absorbed, and that points to the fact that Montreal, Regina, Saskatoon and Winnipeg are more concerning than Toronto, he suggests (he emphasized that even in those cities "a price collapse is not looming," in his opinion it's just a situation worth monitoring).

In Toronto in 1998 the average condo project was about 125 to 150 units and those units took about 12-1/2 months to build. Now the average condo project has about 260 units and they are taking more than 26 months to build.

Shaun Hildebrand, senior vice-president at Urbanation Inc., which tracks Toronto's condo market, recently predicted that condo construction in the city will pick up again soon based on a recent rebound in pre-sales, so many observers aren't ready to stop worrying about a potential glut of units in Canada's most populous city just yet.

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