A survey by Canadian real estate company Royal LePage showed that Canada’s residential real estate market will continue to be unusually strong during the first half of 2010, as economic conditions across the country improve and the stimulus impact of low interest rates continues to stoke demand.

Average house price levels are expected to increase as confidence builds in the recovery during the first half of the year. However, the market will stabilise in the second half of the year when house price increases are expected to moderate due to the expected late-year modest increase in interest rates, together with an improvement in listings supply as confidence improves, according to the report.

Phil Soper, president and chief executive of Royal LePage Real Estate Services, said: “The Canadian real estate market enters 2010 with considerable momentum from an unusually strong finish to the previous year.

“The stimulus effect of low borrowing costs has contributed to a sharp rise in demand that has driven activity levels to new highs. This demand, coupled with a typical seasonal undersupply of homes for sale, should cause home prices to continue to appreciate significantly during the early months of the year. Improving supply as the year unfolds and easing demand as the cost of home ownership rises should moderate home price increases in the second half of 2010.

“Our forecast is built upon an expectation that interest rates will ease upward before the year’s end, which should have a dampening effect on demand, allowing it to come into balance with the supply of resale homes on the market. Further, we expect to see an increasing number of homes listed for sale as the year progresses.”

House prices appreciated towards the end of 2009, with price averages for Q4 surpassing averages for the same quarter in 2008. The average price of detached bungalows increased by +6% to $315,055, whilst the price of standard two-storey homes rose by +5.2% to $353,026 and the price of a standard condominium went up +6.4% to $205, 756.

The regions which saw the strongest declines during the recession are now showing marked gains, with Toronto and the Lower Mainland, B.C. Vancouver in particular experiencing a robust quarter, with home prices rising across all housing types surveyed.

Soper said: “As consumer confidence has improved, Canadians have shown a lingering reluctance to acquire depreciating assets such as consumer durables, but have embraced the opportunity to invest in real property. Predictably, the regions benefiting most from this renewed interest in home ownership are those with lower average house prices and strong economic confidence, such as Winnipeg and parts of Atlantic Canada.”

The first two quarters of 2009 saw significant year-over-year price declines across the housing types surveyed and the third quarter provided the first signs of a strong rebound in Canadian home values.