Stephen Jarislowsky, chairman of Montreal-based investment adviser Jarislowsky Fraser, said he is 'convinced' there’s a bubble in Canada’s housing market, fueled by government measures that encouraged consumers to take on debt.

'They have basically encouraged people to buy houses based on cheap mortgages,' Jarislowsky, said in a telephone interview from Montreal. 'That has created the opposite effect of what was desirable.'

Canadian home prices and resales will grow to records this year, boosted by low interest rates, the Canadian Real Estate Association said in a report this week. Canadian new-home prices rose 0.4% in December from the previous month, the sixth straight gain, government figures showed yesterday.