TORONTO, Sept. 27, 2011 /CNW/ - The renewed slowdown in global economic
activity is putting further downward pressure on already-weak
residential property markets across much of the developed world,
according to the latest Global Real Estate Trends report released today
by Scotia Economics.
"In the majority of the major markets we track in North America, Europe
and Australasia, inflation-adjusted home prices declined on a
year-over-year basis in the second quarter of 2011," said Adrienne
Warren, Senior Economist and Real Estate Specialist, Scotia Economics.
"While Canada's hot housing market also has begun to cool, it remains a
"Historically low borrowing costs combined with sharply lower home
prices -- in many markets -- have restored considerable housing
affordability," added Ms. Warren. "In more typical times, this would be
a sufficient catalyst for a strong revival in housing demand. Indeed,
residential investment traditionally has played a leading role in
But these are not normal times, according to the report. Consumer
confidence has been dented by persistently high unemployment,
intensifying European sovereign debt concerns, and signs that the
global economic recovery is rapidly losing momentum. Renewed financial
market volatility is adding to the general sense of unease. Many
household are choosing to prioritize savings and debt repayment over
major new purchases.
"We expect global housing demand to remain moribund until the global
economic recovery gets back on a firmer footing and some financial
market stability returns," stated Ms. Warren. "An oversupply of
owner-occupied housing, due to overbuilding and rising foreclosures,
remains problematic in many markets, adding to the downward pressure on
prices. A generally more cautious lending environment also will hold
back the pace of recovery."
Of the nine major developed markets tracked by Scotia Economics, with
available Q2 data, only Canada, France and Switzerland registered
positive year-over-year (y/y) real price growth.
Canada's housing market stands out in its resilience and longevity.
Average inflation-adjusted existing home prices were up five per cent
y/y in the April-June period, on par with the first-quarter's pace of
appreciation. Data for July and August point to continued firm but
stable sales through the late summer, alongside a levelling out in
"Ultra-low interest rates will continue to support affordability in the
face of record high prices," noted Ms. Warren. "Nonetheless, heightened
economic uncertainty combined with recent signs of a loss of momentum
in Canada's jobs market could keep some potential buyers on the
sidelines for the time being. On balance, we anticipate a modest
slowdown in the volume of sales transactions heading into year end,
alongside relatively flat prices."
France has so far bucked the broad deteriorating trend seen in many
other European property markets. Average inflation-adjusted home prices
rose five per cent y/y in Q2, only modestly below the seven per cent
y/y increase in Q1. Switzerland's housing market also remains quite
buoyant. Average real home prices were up four per cent y/y in Q2,
maintaining the steady pace of appreciation of recent years.
In the remaining six markets, real home prices declined on a y/y basis
in the latest quarter. In the United States, average inflation-adjusted
home prices fell six per cent y/y in Q2, a slightly larger decline than
the five per cent y/y retrenchment recorded in Q1.
Over in Europe, average inflation-adjusted home prices in the U.K. were
down six per cent y/y in Q2, a faster rate of decline compared with the
prior quarter's four per cent y/y slide. The slump in Spain's property
market continues unfettered. Average inflation-adjusted home prices
were down 10 per cent y/y in Q2 after falling nine per cent y/y in Q1.
Ireland's housing slump, the deepest in Europe, shows no sign of
letting up. Inflation-adjusted home prices were down 14 per cent y/y in
Q2, an acceleration from the first quarter's 12 per cent y/y decline.
Home prices in Sweden turned negative on a y/y basis in Q2 for the
first time since 2009Q1, albeit falling just one per cent y/y.
Some air has been let out of the sails of Australia's property boom.
Inflation-adjusted prices fell six per cent y/y in Q2, following a
three per cent y/y decline in Q1. However, the recent setback follows
outsized gains in recent years, leaving average prices near record
Scotia Economics provides clients with in-depth research into the
factors shaping the outlook for Canada and the global economy,
including macroeconomic developments, currency and capital market
trends, commodity and industry performance, as well as monetary, fiscal
and public policy issues.
SOURCE Scotiabank - Economic Reports
For further information:
Adrienne Warren, Scotia Economics, (416) 866-4315, email@example.com
Patty Stathokostas, Scotiabank Media Communications, (416) 866-3625, firstname.lastname@example.org