A U.S.-style housing crash is unlikely in Canada, says a study by the C.D. Howe Institute.

A decline in underwriting standards played an essential role in the American housing boom and subsequent bust. That has not been the case in Canada, says the study released Tuesday.

It comes on the heels of another study by the Canadian Centre for Policy Alternatives, which said the Canadian housing market is a bubble ready to burst. It also shows the debate that economists are having over the direction of the market.

Canadian housing policies "worked well in reducing the possibility of a housing bust in Canada," says the C.D. Howe report.

"Many of the concerns about the Canadian housing market are motivated by recent U.S. experiences," wrote economist Jim MacGee, author of the report and an associate professor of economics at the University of Western Ontario.

"A comparison of housing market polices in Canada verses the U.S. suggests that there is a little likelihood of a U.S.-style surge in foreclosures or a collapse of house prices in Canada."

From 2000 to 2006, U.S. house prices climbed twice as much as in Canada. Prices then declined by 30 per cent from 2006 to 2009, according to C.D. Howe.

The decline in Canadian house prices lagged the U.S. and was more muted, as prices continued to appreciate until 2008, then declined by 9 per cent between August 2008 and April 2009. The decline was followed by a sharp bounce upward, with prices returning to their pre-recession high.

The key to Canada's relative strength is that federal policy meant banks north of the border did not engage in the same volume of risky loans.  

Toronto Star Wed Sep 1 2010 Page: B1 Section: Business Byline: Tony Wong Toronto Star