A new analysis finds most Canadians can handle a drop in the housing market but household debt still remains a concern.

Credit rating agency DBRS says the average household would be able to survive a 40 per-cent drop in the value of their home if it were to happen today.

However, they say household debt rising quickly, relative to the economy and average income, is driving up both home prices and borrowing.

As a result the affordability of housing is on the decline with pressure on day-to-day cash flow leaving Canadians little room to deal with unexpected expenses.

Whether or not the housing market is heading for a correction remains a heated debate amongst economists but many observers say it is more likely any drop in prices will be soft not sudden.