Saskatoon remains a bright spot in Western Canada's residential sector, with an 18 per cent increase in housing starts this year, along with an 11.6 per cent increase in housing sales, but in a forecast report next month, Western Investor says 2012 will remain strong, but not nearly as active as this year.

The 2012 forecast says home builders, facing stiff competition from the resale market, will break ground on 2,500 new homes, down about 11 per cent from 2011. The average price of a new detached house will advanced by 1.4 per cent to $388,000, mainly due to an easing of land prices.

Condominium builders are also expected to scale back construction as they focus on selling complete and unsold units, which currently number 1,600, a 66 per cent increase from a year earlier. As a result, total multi-family starts are forecast to be down 21 per cent in 2012 to 950 units.

A wild card is a new home incentive from the City of Saskatoon for first-time buyers. If the program has a strong takeup, it could boos demand for lower-priced new condominums and townhouses next year.

Meanwhile, Saskatoon's apartment rental vacancy rate is forecast to increase to 3.8 per cent in 2012, from 3.6 per cent this year, and average rents are forecast to rise 2 per cent next year.

See the complete Residential Outlook 2012 report on Western Canada in the December issue of Western Investor.