05/22/2014 08:37 EDT | Updated 07/22/2014 05:59 EDT

CMHC Housing Outlook Sees Slowdown In Starts, Prices But No Housing Collapse

sold home for sale sign in...

OTTAWA - Canada Mortgage and Housing Corp. still sees a soft landing in Canada's housing market future, with construction slowing further and price increases levelling off in the low single-digits.

But the latest quarterly forecast sees builders moderating their enthusiasm for speculative construction and aiming to tailor starts to demand, particularly in the overbuilt condo market.

"Builders are expected to continue to manage their starts activity in order to ensure that demand from buyers seeking new condominium units is first channelled toward unsold completed units or unsold units that are currently under construction," said the agency's deputy chief economist Mathieu Laberge.

CMHC predicts the average home price will rise 3.5 per cent to $396,000 this year, and 1.6 per cent to $402,200 in 2015.

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Meanwhile, housing starts are predicted to dip somewhat from the 187,923 units built last year.

The agency forecasts starts this year will range between 172,300 and 189,900 for a midpoint prediction of 181,100. The midpoint forecast for 2015 is 182,100, suggesting a flat but not falling market.

CMHC also sees Multiple Listing Service sales remaining stable, with a midpoint of sales this year at 457,900 units, virtually unchanged from 2013. Sales are expected to pick up to about 471,100 units in 2015.

A number of analysts, including international organizations, have been anticipating a slowdown in the Canadian market, which is among the most robust in the world in defying what has generally been soft economic conditions.

The forecast from the government-held agency that insures higher-risk mortgages suggests that is happening in Canada, but the correction will be soft enough not to severely impact the economy or household wealth values.