The Canadian Press

It’s still a seller’s market for homeowners, but economists say it’s not a real estate “bubble.”

Canada’s housing market is on the rebound after a decline in 2009 with resales expected to set a new annual record this year and home building is off to a strong start, according to two reports Monday.

There in’t a bubble because of a lack of speculation in the real estate market, said Scotiabank senior economist Adrienne Warren.

Prices are being driven by more buyers than sellers, not unexpected with a tight supply, and buyers may be overpaying a little in some markets, she said.

“We don’t think there’s a bubble,” she said from Toronto.

The Canadian Real Estate Association is forecasting resales for homes will set a record in 2010, largely driven by activity in the first six months of this year.

The resale housing market is expected to reach 527,300 units this year, up 13.3% from 2009. This would be a new annual record, up 1.2% above the previous peak in 2007, CREA said Monday.

“You are not hearing about a lot of speculative buying,” Greg Klump, the national real estate organization’s chief economist, said from Ottawa.

“Nor is there a lot of speculative building.”

Low interest rates and buyers wishing to avoid the harmonized sales tax before it comes into effect in Ontario and British Columbia will help fuel resales in the first half of this year, he said.

In the second half of 2010, sales are expected to be lower as interest rates are expected to increase marginally, Klump said.

New housing starts have also gone up, according to figures Monday by Canada Mortgage and Housing Corp.

The seasonally adjusted annual rate of housing starts reached 186,300 in January, up 5.8% from 176,100 in December. CMHC reported actual housing starts for 2009 totalled 149,081 units, with activity improving as the year progressed.

TD Bank economist Pascal Gauthier said there’s talk of a bubble because of how strong housing markets have rebounded after the economic downturn.

“Our expectation is that it will not be sustained. The market will cool off. You could only really have a bubble if that was to continue,” Gauthier said.

Gauthier said he expects housing starts to cool off by mid-year.

The CMHC said urban starts increased 4.4% to 165,200 in January. Urban multiple starts rose 5.7% to 76,300, while single urban starts increased 3.3% to 88,900.

The improving market comes as the federal Competition Bureau said Monday it’s challenging rules imposed by the Canadian Real Estate Association, a body that represents nearly 100,000 real-estate brokers, agents and salespeople.

The federal agency says the CREA rules limit choices for consumers and force them to pay for services they don’t want, also stifling innovation in the market for residential real estate services.