Healthy housing activity is expected across Canada despite some loss of momentum later this year, according to experts who presented on Wednesday at Bank of Nova Scotia’s Canadian Real Estate Outlook and Trends Forum 2007 in Toronto.

“Fuelled by solid economic conditions including moderate interest rates, high employment and strong consumer confidence, Canada’s housing market was quick out of the gate this year,” said keynote speaker Phil Soper, president and CEO, Royal LePage Real Estate Services. “Early indications point to a stronger than forecast spring market, the most important trading period on the annual real estate calendar. We expect that this resilient market will continue throughout 2007.”

“Canada’s housing market is the rabbit that keeps on going, and going,” added Scotiabank senior economist Adrienne Warren, while presenting the findings of her latest real estate trends report. “Warmed by mild winter temperatures, housing starts in January jumped to a two-and-a-half year high while home resales climbed to a new record.”

Warren added that the trend in national new and existing home prices, while off the highs of last spring, is still averaging about 10% year-over-year.

In the report, Warren noted that Canada’s booming western provinces were the hottest markets in the past year. In the last 12 months, home price appreciation west of the Ontario border averaged 18% year-over-year — four times the pace in the East.

The report added that significant regional performance disparities will persist, with the western provinces expected to again lead in average house price increases and construction in 2007, supported by tighter market conditions, record employment rates and more favourable demographic trends. In fact, Western Canada’s active resource industries and tight labour markets attracted more than 70,000 Canadians to Alberta and British Columbia from other parts of the country last year.

Despite the western-biased growth, Warren reported that virtually all of Canada’s major urban markets are currently reporting year-over-year price increases. A number of cities are enjoying strong population and employment growth, which support strong housing price gains. For example, Toronto is the overwhelming destination for immigrants to Canada and natural resource abundant centres such as St. John’s, Saguenay, Que. and Sudbury, Ont. are also witnessing above average job growth.

“The buoyancy of Canada’s housing market is particularly impressive in light of the marked slowdown under way south of the border,” observed Warren, who noted that U.S. housing starts and resale volumes have fallen roughly 25% and 10%, respectively, over the past year.

The report suggests that Canada is unlikely to follow a similar path to its southern neighbour in 2007. Relative to the U.S., speculative investing has been less active, overbuilding less prevalent, and high risk lending less widespread. A consistently strong domestic job market and historically low mortgage rates in Canada are sufficient to maintain at least some forward momentum.

However, some softening in overall Canadian housing activity appears inevitable, since housing affordability has been eroded by the steady run-up in prices since the start of the decade and pent-up buyer demand has been largely absorbed, stated Warren in the report, which also predicted a drop of roughly 10% in home sales and housing starts this year and national price increases in the mid single digits.

At this late stage in the cycle, affordability favours lower-priced multiple-unit housing, such as condominiums, over single-detached homes. In addition “move up” buyers who have already built up equity in their homes will likely be more active than first-time purchasers. Renovation activity should outpace new construction and sales, sustained by the record number of existing home sales in recent years.