Fort McMurray’s fire-ravaged housing market could see a resurgence as returning homeowners snap up empty rental units and the community undergoes largest home building boom in decades, Canada’s federal housing agency predicted.

Housing starts in the heartland of Canada’s oil industry could soar to 2,500 as large-scale efforts get under way to rebuild after wildfires swept through the region in May, Canada Mortgage and Housing Agency said, although much of the rebuilding isn’t likely to start until next year.

“This is expected to be the highest new home construction activity Fort McMurray has seen in twenty years,” wrote market analysts Tim Gensey.

The fires destroyed nearly 10 per cent of structures in Fort McMurray, almost 2,000 buildings, many of them homes. The rebuilding effort could do much to reverse the sagging fortunes of Fort McMurray’s housing market, which had suffered from the drop in oil prices that began in late 2014.

In the months leading up to the fire, sales had plunged to half the five-year average while average resale prices in the first quarter were down 17 per cent from the same period two years earlier. Builders had started construction on just 13 new homes. The community’s rental vacancy rate had soared to nearly 30 per cent.

Much of the city’s rental stock was spared the worst of the blazes and CMHC said it expects returning homeowners to rent while they wait to see when – or if – their homes are rebuilt, helping fill the glut of empty apartments.

While some local oil companies have opened 3,000 rooms in their work camps to displaced residents, many sit unused because they are too remote for commuters and not family-friendly, which is helping to push more residents toward Fort McMurray’s rental market.

Homes in the suburban neighbourhoods of Waterways, Beacon Hill and Abasand were the hardest hit, with 90 per cent of homes in some areas wiped out by the blaze. Mayor Melissa Blake has said that some of the most devastated neighbourhoods may not be rebuilt, a decision that may push more buyers into the resale market, CMHC said.

Many of the listings on the resale market before the fire have since expired and sellers have not relisted. Wood Buffalo real estate board reported that just 8 homes were sold in May, and 79 in June.

A rising number of buyers, coupled with a drop in new listings, could help push up prices on the resale market, CMHC predicted, although it said it’s too early to tell how long both buyers and sellers will sit on fence.

The future of Fort McMurray’s resale housing market will also depend on how much of the $300-million in aid offered by the federal government goes toward rebuilding private homes not covered by insurance, CMHC said, along with the outlook for oil prices.