OTTAWA — The pace of home building slowed last month, part of a forecast cooling of the hot housing market that will continue into next year and which will dampen both sales and price increases.

“Canada’s housing market will likely cool to more sustainable levels in 2005 after hitting all-time sales records in all regions of the country this year,” Scotia Economics said in a report yesterday.

The forecast was issued as Canada Mortgage and Housing Corp. reported that housing construction starts in October fell five per cent to an annual pace of 225,000 from an upwardly revised 237,900 in September.

While the pace of construction slowed in B.C., Lower Mainland starts are running well ahead of a year ago and expected to stay strong next year.

Nationally starts are on track to reach a 17-year high in 2004, the federal housing authority said. “Favourable economic factors, such as recent growth in full-time employment and low mortgage rates, continue to stimulate residential construction activity,” said CMHC economist Bob Dugan.

After reaching a 15-year high annual pace of 252,900 in March, housing starts fell back for four months, reflecting in part the rise in mortgage rates through the spring and into summer, said Ted Carmichael, economist at J.P. Morgan.

The pace of construction picked up later in the summer as mortgage rates eased back down in the summer.

“Further rate hikes by the Bank of Canada will likely put renewed upward pressure on mortgage rates,” he said. “Housing activity is expected to continue to moderate in the months ahead, and the contribution of housing activity to economic growth is expected to diminish.”

However, Scotia Economics said the cooling of the housing market will not be dramatic.

“The geographical diversity of the current housing market boom is not indicative of a seriously overheated market or overly speculative investor activity, suggesting the odds of a major correction are low,” said the report by Scotia Economics economist Adrienne Warren.

© The Vancouver Province 2004