Still More Weakness than Strength in Global Housing Markets: Scotiabank
TORONTO, Dec. 11, 2012 /CNW/ - The downward pressure on pricing in a number of national housing markets appears to have eased over the summer and early fall though considerable strains remain, according to a Global Real Estate Trends report released today by Scotiabank.
"In the majority of advanced and emerging nation property markets we track, average inflation-adjusted house prices were negative on a year-over-year (y/y) basis in the third quarter," said Adrienne Warren, Senior Economist and Real Estate Specialist at Scotiabank. "However many are showing some tentative signs of stabilization, including the U.S., the U.K., Australia and China, supported in part by highly accommodative monetary policy."
At the same time, there is little evidence of significantly improved momentum. Outside of the continuing deep property slumps in Spain and Ireland, pricing in most national housing markets appears range-bound for the time being. In 12 of the 17 (71%) countries reporting Q3 data, average prices were in a +/- 3% y/y range. In 14 (82%), they were within +/- 4% y/y.
"This relatively flat global performance suggests an ongoing high degree of caution among households and investors unwilling to make big residential property bets at this juncture," said Ms. Warren. "Lower home prices and historically low interest rates are supporting affordability, but in many countries mortgage lending conditions remain tight and unemployment is elevated."
According to the report, Canadian housing activity has geared down. Average inflation-adjusted home prices were moderately below year-ago levels (-1.5% y/y) for a third consecutive quarter in Q3. Exhausted pent-up demand and reduced housing affordability in high-cost urban centres have dampened sales, while the return of balanced conditions in the majority of local markets has cooled pricing.
At the same time, housing activity in the U.S. is gearing up. Real home prices rose 5% y/y in Q3, an acceleration from the 3% advance recorded in the prior quarter. Despite the uptick, average prices are still down roughly 30% from their 2005 peak, underscoring the long road to recovery ahead for the U.S. housing market. The improvement is being supported by moderate job growth, record housing affordability and fewer distressed property sales.
Housing markets remain weakest in Europe, not unexpectedly given ongoing recessionary conditions, fragile consumer confidence and high joblessness. The euro zone wide unemployment rate rose to a record 11.7% in October, while for young workers under 25 it has soared to almost 24%. Wage compression and emigration are further reducing the pool of potential homebuyers. These markets are expected to remain under pressure through 2013.
Real home prices in the majority of major cities in China were modestly below year-ago levels in Q3, though conditions appear to be steadying. Official efforts in recent years to rein in soaring property values appear to have succeeded, allowing for some easing in monetary policy. In India, a muted economic performance, weak consumer confidence and high inflation and interest rates are weighing on the country's housing market. Real house prices declined y/y in the majority of major cities for a second consecutive quarter in Q3.
In the Latin American region, average real house prices were down 1% y/y in Q3 in Mexico, where persistent inflationary pressure are keeping policy interest rates relatively elevated. Chile is reporting moderate residential property price gains averaging 2% y/y, supported by relatively strong domestic activity and a tight labour market. Colombia continued to record strong house price growth through Q2, though slowing consumer spending and credit demand point to some deceleration since mid-year.
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