Housing construction in Orléans. Photo/Darren Brown

Experts in the housing field expect Canada's real estate market to moderate in 2008, as the economy slows.

"Our expectations are that balanced conditions will prevail throughout 2008, which will mark a return to a more 'normal' environment than the highly skewed seller's market that we have experienced over the better part of this decade. A stumbling American economy will impact us, slowing growth here at home, yet the solid foundation that supports the contemporary Canadian economy should prevent the housing market here from retracting," Phil Soper, president and CEO of Brookfield Real Estate Services, told Scotiabank's Canadian Ral Estate Outlook and Trends Forum in Toronto.

Scotiabank economist Adrienne Warren said the bank expects housing starts to slow to around 204,000 units in 2008.

"We expect construction, sales and price gains to moderate in 2008 due to decreasing affordability, especially for first-time buyers, and some softening in domestic economic conditions associated with the intensifying U.S. slowdown."

Ms. Warren said more balanced resale market conditions, as sales volumes edge down and more listings come on stream, should bring average price increases back into the mid-single digit range.

Home prices rose on average 11 per cent in 2007 and are expected to keep climbing in 2008.

Affordability is becoming a constraining factor in several centres, including Calgary where average home prices have doubled in the past four years.

Meanwhile, the commercial real estate market is likely to remain brisk even as the housing market cools.

"Given a high pre-lease ratio, vacancy rates should remain low and rents on the rise," Ms. Warren said. "The national downtown office vacancy rate hit a 22-year low of just 4.7 per cent in the final quarter of 2007, with both Calgary and Vancouver below the three per cent mark. Demand for new office space is being supported by strong employment growth, environmental and technical upgrades, and institutional investor interest."