House prices in the Calgary region are expected to rise in the next two years, according to Canada Mortgage and Housing Corp.

In a new forecast report released Wednesday, the CMHC said the annual growth rate for MLS average prices in the Calgary census metropolitan area will be 2.2 per cent in 2011 and the same amount in 2012.

The average sale price will reach $407,500 this year and $416,500 next year.

The CMHC is forecasting MLS sales in the Calgary region of 22,000 this year, which is a 4.8 per cent hike from 2010, and 22,500 in 2012 for another 2.3 per cent increase.

However, total housing starts in the Calgary CMA this year will fall by 15.8 per cent to 7,800 units. But the CMHC says they will rebound in 2012 to 9,000, a 15.4 per cent jump.

“The housing market for 2012 looks promising,” said Richard Cho, senior market analyst in Calgary for Canada Mortgage and Housing Corp. “The economic fundamentals are gradually improving and expected to sustain demand for housing.

“Listings in the existing home market and inventories of new apartment units have also been gradually improving. We are anticipating market conditions to be more balanced and to see more activity next year compared to what we have experienced so far in 2011.”

Cho said new construction of single-detached homes has been tempered this year as builders manage the risk of any large scale increases in inventory. This has kept inventories of single-detached units relatively low.

“We anticipate demand for new homes to improve in 2012 as the economy continues to create jobs and attract migrants,” he said. “Competition from the existing home market is also expected to ease as listings move to more balanced levels.

“Multi-family construction is also expected to see a lift in 2012. Elevated apartment inventories are holding back some new construction this year. However, apartment inventories have been declining, providing an opportunity for builders to increase production in 2012. In addition, as prices and mortgage rates move higher, demand for multi-family units will improve as some prospective buyers consider more affordable alternatives.”

In the single-detached sector, the CMHC is forecasting starts to reach 5,000 this year, a 13.5 per cent decline from 2010 but increase by 10 per cent in 2012 to 5,500 units.

In the multiple-family sector, the forecast is for a 19.5 per cent decline this year to 2,800 units but increase by 25 per cent in 2012 to 3,500 units.

“The activity in the energy sector is anticipated to fuel economic growth,” said Cho. “This will contribute to job creation, growth in wages as well as attract people from other provinces and countries and in turn support housing demand. Mortgage rates are also anticipated to remain favourable for prospective buyers.

“We are forecasting the average resale (MLS) price to post modest gains this year and next. The housing market is expected to experience improved market balanced over the remainder of the forecast period as sales rise and new listings moderate.”

Meanwhile, changing economic and market conditions have spurred the Calgary Real Estate Board to significantly revise downward its annual forecast for MLS sales.

In its August market update, CREB predicts 13,100 single-family home sales for the year. While that’s an increase of 7.7 per cent over 2010, it’s down from the 14,500 sales predicted in its annual forecast, which was released in January.

Condo sales are now expected to decline 1.51 per cent, with 5,100 forecast – CREB’s January numbers had called for 6,000 sales, a 15.8 per cent year-over-year increase.

The new numbers suggest an average single-family sale price of $470,000, down from $480,000 predicted in January, but still 1.89 per cent higher than the average price in 2010.

Condo prices, meanwhile, are expected to rise 0.04 per cent, with an average price of $290,000. CREB forecast an average price of $295,900 in January.

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