Housing starts will register another strong year in 2006, according to Canada Mortgage and Housing Corporation’s (CMHC) third quarter outlook. Starts will reach 227,900 units in 2006, before decreasing to 209,100 units next year.

Although residential construction will ease, 2007 will mark the sixth consecutive year in which housing starts exceed 200,000 units.

“Housing starts this year will be stronger than previously forecast, mainly due to persistent strong demand in Alberta where starts will increase by 20% in 2006,” said Bob Dugan, chief economist at CMHC. “Higher mortgage carrying costs, due to modest increases in mortgage rates and rising house prices, will temper housing demand in Canada in the latter part of this year and next.”

Existing home sales, as measured by the Multiple Listing Service (MLS), will register their second best year on record with 481,700 units in 2006, a slight decrease compared to the previous year. A rising supply of listings will give home buyers more choice thereby reducing the spillover effect into the new home market. The level of MLS sales will remain high in 2007 at 462,200 units, their third highest level on record. However, marginally higher mortgage carrying costs will ease demand for existing homes in many centres across Canada.

Strong MLS price growth in the western provinces will push the Canadian average price increase to a 17year high of 12% in 2006. In 2007, higher listings and lower MLS sales will move the resale market toward more balanced conditions, and growth in average MLS prices will slow to 6.4%.

In British Columbia, a healthy economy, a strong labour market, confident consumers, and relatively low mortgage rates will result in 37,000 housing starts this year, a 6.7% increase from last year. In 2007, housing starts in B.C. will decrease to 34,900 units.

In Alberta, total housing starts are expected to reach 49,000 units this year, surpassing the previous record of 47,925 in 1978. The strong performance will continue into 2007, though starts will slip to 45,000 units as escalating ownership costs inhibit demand.

Total housing starts are expected to increase 4.7% to 3,600 units in Saskatchewan in 2006 and remain unchanged in 2007.

Housing starts in Manitoba will surpass 5,000 for the first time since 1988. Total housing starts are forecast to reach 5,150 units in 2006 and 5,100 units next year.

Ontario home starts will moderate, but will remain above historical averages. Housing starts will decrease to 77,000 units in 2006 and to 70,000 units in 2007.

Modest economic growth, rising mortgage carrying costs, and the erosion of pent up demand will cause demand for ownership housing to slow in Quebec. Housing starts will drop by 11.6% in 2006 to 45,000 units and will decrease to 40,000 units in 2007.

In New Brunswick, tarts will decrease to 3,445 units and 3,120 units in 2006 and 2007, respectively.

Housing starts in Nova Scotia will reach 5,075 total units this year and 4,800 total units in 2007.

In P.E.I., housing starts are expected to decline slightly over the forecast period but remain strong in historic terms. Expect total starts to reach 725 units in both 2006 and 2007.

In Newfoundland and Labrador, housing starts will decline to 1,875 units this year and 1,850 units in 2007, as higher mortgage carrying costs and weaker employment growth dampen housing demand.