New home construction in London has rocketed nearly 50 per cent as the region's housing market continues to defy predictions of a slowdown.

New home construction yesterday joined the resale market on its hot streak, with apartment construction and single home starts leading the charge, the Canada Mortgage Housing Corp. reported.

"It is very positive, construction is still vibrant and it's a good sign," said Jim Vanderhoeven, president-elect of the London Home Builders Association. "We are pleasantly surprised by this. We see signs that other centres are not having these results."

From January to August, in London alone, total starts for all types of new homes jumped 47 per cent, to 2,072 from 1,410 and in the region, it rose 38 per cent to 2,579 from 1,869.

Last month, single-home starts in London and area jumped 20 per cent compared to August 2005, and total home starts -- including apartments and semi-detached units -- jumped 24 per cent to 245 from 198 last August.

Apartments are also playing a role as work began on 830 units last month -- most of those in the downtown -- compared to only 300 last year, said Penny Wu, market analyst for CMHC in London.

"London has a lot of land available for development and in other cities we have seen more restrictions," said Wu.

Stable interest rates are helping starts, she said, but the economy -- especially in the manufacturing sector -- seems to be cooling, with layoffs increasing at industrial businesses.

"Consumer confidence has declined, but that is an impact that will be felt slowly," said Wu.

Vanderhoeven believes the regional economy as a whole remains strong, and with plenty of available land, low interest rates and relatively low home prices, the market is staying hot.

He downplayed recent announcements that may see about 3,000 job losses in the manufacturing sector over the next two years in the city and region, saying industrial jobs are cyclical, cuts may not occur or jobs may be replaced by gains in other areas.

"When you hear news of plant closings, it is always a concern, but I will believe it when I see it." he said. "I think there are plants opening as well. There is still demand for new homes."

Alan Churchill, operating partner at Reid's Heritage Homes, believes London is a market that seldom sees dramatic swings in sales.

"London is a conservative city, buyers are very value conscious. We do not see the swings here, so good times are sustained longer and it drops slower, and not as low (as other cities)," he said.

But the good times cannot last. The CMHC is projecting the London housing construction market will drop 10 per cent in 2007, said Wu.

"We think housing starts will slow in 2007," she said.

If it is only 10 per cent -- Vanderhoeven will take it.

"That is not a big drop. If you look at how much homes are up now, it is not dramatic. It is very realistic," he said. "We've been on a nine-year run, so if there is a correction like that, it will feel like taking a breather."

Some cities have seen a 30-per-cent drop in new home starts, added Churchill.

"Other communities have green-belt problems, municipal servicing issues, environmental problems. In London we have dealt with those and it has helped us keep product on the market." he said.

Last week, the London and St. Thomas Real Estate Board reported resale home figures also remained strong. Last month was the second-best August on record, with 832 sales. The record for August was set last year with 892 sales.

So far this year, 6,504 homes have been sold, a 1.6-per-cent increase over last year.

Nationally, however, housing starts fell by 9.6 per cent to 213,700 units in August, their lowest level since last October.

The drop was largely caused by a marked decline in multiple-unit starts in many regions, said the CMHC.

Even though August's backslide was larger than forecast, economists said Canadian housing activity continues to fare better than in the United States.