A report by Re/Max Canada and Clayton Research says real estate prices in Canada will rise an average of 13 per cent after inflation by 2011, and that all areas of the country should enjoy robust real estate activity during the coming decade.

The study assumes that prices will rise above the rate of inflation, thus creating real wealth for homeowners. Assuming average inflation of 2 percent annually plus 13 percent additional price appreciation, it means home values are expected to rise 33 percent during the decade (2 x 10 = 20 + 13 = 33). This means a home now valued at $100,000 would be worth $138,358 if values rise 3.3 annually during the coming decade.

By 2011, the youngest of the baby boomer generation will be 45 years old. The report says that traditionally, housing values tend to be about 10 per cent higher than the national average for households headed by 45- to 64-year-olds.

Factors that will support a strong housing market, says the report, include income growth, population growth and expanded demand for home ownership. There will be 1.5 million new Canadian households during the next decade. Strong demand from first-time buyers aged 20 to 35, and from investors who recognize the long-term value of real estate as an investment, will also fuel the market, the report says.

This was a record year for existing home sales in Canada, thanks to low interest rates and several previous years of steady job growth. Most economists predict the current economic slowdown will be temporary, and that interest rates will stay low enough to continue attracting buyers. Canada's urban centres also have extremely low rental vacancy rates, which is adding to the demand for home ownership.

The Clayton Research Re/Max report says the value of existing housing stock during will rise 13 per cent by 2011, an appreciation of $155 billion. The urban centres will get the biggest boosts, with Calgary leading the way. The report says Calgary is a young city with a strong first-time buyer market, and lot of people in the younger half of the baby boomer age group. These are the people most likely to move up to higher-priced houses. The report says Calgary prices will rise 20 to 25 per cent.

Ontario cities such as Toronto, Ottawa and Kitchener-Waterloo will see price increases of 15 to 20 per cent, the report predicts. Toronto is a magnet for immigrants to the country. Although the number of newcomers to the city will slow down with tighter requirements now in place, immigration and the lack of affordable rental accommodation will keep the Toronto market humming.

Another trend is for "empty nesters" -- those whose children have moved out of the family home -- to downsize their houses but not their housing values. Many empty nesters are moving out of large suburban homes and into luxury townhouses or apartments of equal or greater value.

In the nation's most expensive housing market, Vancouver, prices have risen about 5.7 per cent annually during the last 18 years. Price increases are likely to slow down during the next decade, says the report, with appreciation expected to improve about five to 10 per cent.

Whistler, British Columbia is in the running for the 2010 Winter Olympic Games, which could boost housing prices even more. Another recent report by Canada Mortgage and Housing Corp. www.cmhc.ca says the average Whistler price could hit a cool $3 million by 2010. Whistler is often compared to Aspen, Colorado as a popular ski destination.

Montreal prices are also expected to rise five to 10 per cent during the next 10 years. The Re/Max Clayton report notes that move-up buying by late baby boomers, and a strong first-time buyers market will keep things moving. In Montreal, adult children tend to live at home longer than in the average Canadian city, possibly because of the tightening of the rental vacancy rates in that city, says the report. This will slightly mitigate the demand for smaller homes.

Across the nation, single-family homes will be in strongest demand, representing about 60 per cent of the new households. The report says there will also be a healthy demand for apartment condominiums during the next decade. First-time buyers, some limited move-down activity and a continuing trend of suburbanites moving back to the city will help create medium and high-density communities in the downtown cores, the report says.