Canada's housing market is expected to remain strong in 2008 despite a predicted slowdown in new home starts.

In 2008, residential construction is predicted to decline to about 211,700 units, from 228,343 units in 2007, says a report by the Canada Mortgage and Housing Corporation's (CMHC).

Bob Dugan, chief economist for CMHC, said Monday that the outlook is still very solid despite the declining figures.

"We're at very, very high levels historically," Dugan told CTV's Canada AM.

"We're above 200,000 units now for a seventh consecutive year -- that hasn't happened since the early 1970s."

Dugan said the levels are so high that they will have to eventually come down.

"It's not the kind of level of housing starts that we can sustain for a very long period of time," he said. "I think eventually we're going to see them move even lower still."

Dugan said housing starts will probably fall to about 180,000 units in the next few years -- a reflection of demand across Canada.

Meanwhile, sales of existing homes are also expected to drop by 3.9 per cent in 2008 -- to 499,650 units.

"That's still going to be the second best year ever recorded for existing home sales," said Dugan.

In 2007, about 520,000 units were sold.

Provincial breakdown

Alberta is expected to face a drop in net migrants between now and the end of 2008 -- a situation which will cause housing starts to slow, says the CMHC.

Alberta's housing starts, which were 48,336 units in 2007, are expected to fall to 39,500 in 2008 and 37,750 in 2009.

In Saskatchewan, the province is expected to build on its strong housing demand in 2008.

Total housing starts in that province reached 6,007 units in 2007, the highest level in 24 years.

While demand will remain strong, escalating costs will push housing starts down to 5,600 units in 2008 and 5,300 in 2009, says the CMHC.

Manitoba is also predicted to have strong levels of new home construction this year.

Meanwhile, Toronto will see a pick-up in new housing starts because of booming condo sales, said Dugan.

Quebec, which saw housing starts push up 1.4 per cent to 48,553 units in 2007, will see a slight shift downwards to 46,500 units in 2008 and 45,375 in 2009.

In New Brunswick, high mortgage costs, a slower economy and more choice in the resale market is expected to slow new home construction.

Nova Scotia is also expected to see a drop in housing starts in 2008 -- down from 4,750 in 2007 to 4,550.

Overall, Dugan said Canada's housing market has not been hit too hard by the sub-prime mortgage crisis south of the border.

"It has dampened things a little bit but it's still a very buoyant outlook," he said.

For a full list of the report's findings click here.