Canada's federal housing agency says it expects the housing market to recover in the next two years after declines in home building, sales and prices.

Canada Mortgage and Housing Corp. says in its annual market outlook that housing starts should come in at around 200,000 units next year after declining this year and last.

It says home sales are expected to increase in the next two years, offsetting declines since 2016, as household disposable income grows.

Home prices are also expected to start growing in 2020 and 2021 to raise the average price above the 2017 peak.

CMHC warns that trade tensions and high household debt still present risks to the economy and housing market stability.

It also says that higher interest rates or a rise in unemployment could hit already strained budgets and put pressure on housing activity.