After housing starts in Canada reached 227,935 units at the close of 2006, the second highest level in two decades, they are predicted to moderate this year to 209,500 units, according to Canada Mortgage and Housing Corporation (CMHC). Although residential construction will decline, 2007 will mark the sixth consecutive year in which housing starts exceed 200,000 units. Starts will ease further to 195,500 units in 2008.

"Construction activity will continue to moderate as demand for home ownership moves toward more sustainable levels," said Bob Dugan, Chief Economist at CMHC. "Most of the pent-up demand that built up during the 1990s has been absorbed, and higher mortgage carrying costs due to continued strong price growth and modest increases in mortgage rates will contribute to the slower pace of new home construction both this year and next."

The slow construction activity for single-detached houses that began in 2005 was interrupted in 2006 by the need to house the workers attracted by the booming western Canadian economy. At 123,000, single-detached starts are up 2.1 per cent from the 2005 level. In 2007, they will fall 10.0 per cent to 110,700 units. Multi-family units are at a record high at 104,700 units, reflecting high mortgage rates that drive buyers to cheaper options. High-density units, which account for two-thirds of the multi-family housing starts, rose 3% in 2006, but are expected to decline by the same amount in 2007.

Strong price growth in the western provinces caused the average Multiple Listing Service (MLS®) for all of Canada to increase by 11.5% in 2006, the highest increase since 1989 when prices were up 17.9%. Higher listings and lower sales will move the resale market toward more balanced conditions and growth in average prices are expected to slow to 5.7% in 2007 and 3.3% in 2008.

Source: Canada Mortgage and Housing Corporation