Canada's home-building industry will slow by 7.5 per cent this year and 6.5 per cent in 2007, Canada Mortgage and Housing Corp. predicts.
And home price increases, after hitting 10 per cent in 2005 - the biggest surge in 16 years - are forecast to moderate to 5.5 per cent this year and 3.8 per cent in 2007.
The federal Crown corporation said housing starts this year are expected to total 208,700 units, down from 225,481 in 2005. Starts in 2007 are forecast to decline to 194,800, ending five consecutive years above 200,000.
"The housing market will continue to moderate both this year and next as demand for home ownership eases toward more sustainable levels," said Bob Dugan, chief economist at CMHC.
"Higher mortgage carrying costs due to strong house-price growth and modest increases in mortgage rates will contribute to the slower pace of new-home construction."
Sales of existing homes, which hit a record 481,900 units in 2005, are expected to ease about four per cent to 461,500 this year.
Don Lawby, president of Century 21 Canada, said "a little bit of pressure will be taken off the increase in housing prices" this year, but notes that does not mean the market will slow.
"More and more Canadians are using the equity that has accumulated in their homes to move upmarket," Lawby said. "The consumer confidence that is creating today's housing millionaires is based on strong economic fundamentals - and I can't see it changing anytime soon."
Lawby said real estate prices move in step with consumer confidence, population and the economy - indicators that vary across the country.
In 2006, CMHC said, Alberta's vibrant job market will continue to be a magnet for workers from other parts of Canada, and the population growth will help keep total housing starts strong at 39,500 units, falling slightly to 37,500 units in 2007.
British Columbia's new-home construction will remain high by historical standards, thanks to growth in incomes and high levels of consumer confidence, CMHC added. Those factors will be partly offset by rising construction costs and interest rates, but 32,600 units should be started this year.
Manitoba is the only province that can expect rising sales of existing homes and rising construction for both this year and next.
A resurgence in the number of immigrants arriving in Ontario should support demand in that province.
