OTTAWA — Canadian home prices should continue to rise next year, despite sales levels flattening in most major markets, said Re/Max in a report released Tuesday.

The real estate firm said home prices should, on average, rise three per cent to $350,000 by the end of 2011, while existing-home sales will remain flat.

It forecast that home sales this year would be down five per cent to 441,000, with prices growing seven per cent to $340,000.

The Re/Max report said fewer homes on the market have offset the diminished demand this year, helping to keep prices rising.

Some of the factors Re/Max said will continue to push prices up and keep sales steady in the years ahead include land scarcity as housing is intensified in urban areas, immigration, the strength of the market for higher-end homes and the prospect housing presents as a stable investment.

While the lack of growth in sales, along with price gains that are merely in the single digits, mark a change in pace from recent years, Michael Polzler, an executive vice-president for Re-Max, said it’s more a “return to the traditional real estate cycle” than a “new normal.”

“The past decade was truly unprecedented; never before have we experienced a run-up that was as strong or lasted as long,” he said in a statement. “As we have digressed from the typical pattern, people have forgotten what the usual healthy cycle looks like, but all the hallmarks are there.”

Twitter.com/derekabma