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Canada new home prices rise 0.2 pct in March

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* New home prices rise 0.2 pct, matching forecasts

* Calgary biggest contributor with 0.8 percent increase

* Prices flat in 11 cities, down in five and up in five

OTTAWA, May 8 (Reuters) - The price of new homes in Canada rose 0.2 percent in March, with the oil-industry capital Calgary making the biggest contribution to the gain for the third straight month, according to Statistics Canada data on Thursday.

The monthly increase was in line with the median forecast in a Reuters poll.

Year-on-year, prices nationwide were up by a modest 1.6 percent, within the 1 to 2 percent range registered over the previous year.

Calgary, located in the western oil-producing province of Alberta, led the way on new home prices and its 0.8 percent price jump was the biggest of any city.

Prices were flat in the Toronto-Oshawa region and in Montreal while they fell by 0.1 percent and 0.2 percent in Vancouver and Victoria, respectively.

Overall, prices were unchanged in 11 of the 21 urban areas surveyed, up in five and down in five.

The Canadian government, which has intervened in the mortgage market several times since 2008 to cool the sector, has long warned that the combination of high housing prices and heavily indebted Canadians could trigger widespread defaults in the case of an economic shock. But officials now expect the market to stabilize gradually.

The new housing price index excludes condominiums, which the government says are a particular cause for concern.

(Reporting by Louise Egan and Alex Paterson)