TORONTO, June 9, 2011 /CNW/ - After some encouraging signs of revival
last year, residential real estate markets in much of the developed
world are losing momentum — or in some cases, even reversing course,
according to the latest Global Real Estate Trends report released today
by Scotia Economics.
"Increasing nervousness over global economic prospects alongside rising
food and gas prices and persistently high unemployment are keeping
potential buyers on the sidelines despite highly accommodative monetary
policy," said Adrienne Warren, Senior Economist and Real Estate
Specialist, Scotia Economics. "A lingering oversupply of housing and/or
still tight credit conditions are reinforcing the downward pressure on
sales and prices in a number of markets globally."
"A marked improvement in housing affordability, particularly in those
regions suffering large valuation declines in recent years, will
eventually put a firmer floor under prices and underpin a gradual
turnaround for the sector," added Ms. Warren. "For the time being,
however, the process of repairing bloated public and household balance
sheets points to a protracted period of subpar economic growth among
debt-heavy developed nations that will restrain household borrowing and
spending. A generally more cautious lending environment also will hold
back the pace of recovery."
Australia's seemingly impermeable housing boom has languished in recent
months. While benefitting from strong economic growth and low
unemployment, record high home prices alongside a series of interest
rate increases by the Reserve Bank of Australia (RBA) are eroding the
nation's already highly strained affordability. Average home prices in
Q1 were unchanged from a year earlier, and down 3.5 per cent adjusted
for inflation. While the RBA has put further rate hikes on hold for
now, the eventual resumption of monetary tightening will reinforce the
more muted housing outlook.
Canada reported positive real price appreciation in the first quarter of
2011, with average inflation-adjusted home prices up five per cent year
over year (y/y) in Q1. The national average, however, is skewed by
strong sales, including by foreign buyers, of high-priced properties in
the Greater Vancouver Area. Excluding Vancouver, average real prices
were up just one per cent y/y in Q1, consistent with a more balanced
"Housing sales in Canada, while below the record-setting pace seen at
the height of the boom in 2005-2007, are being supported by steady job
creation and still attractive borrowing costs," stated Ms. Warren.
"Relatively tight supply is adding to price pressures in several
cities. Nonetheless, high home prices, the further tightening in
mortgage insurance rules effective mid-March, and the upward drift in
fixed mortgage rates this year appear to have slowed demand somewhat,
most notably among first-time buyers. We anticipate relatively flat
sales volumes and average prices through the latter half of the year."
Turning to Europe, U.K. real estate markets also took a step back in
early 2011 following a short-lived recovery last year. Average
inflation-adjusted home prices were down four per cent y/y in Q1.
Notwithstanding ultra low borrowing costs, recent tax breaks for home
buyers and an easing in lending conditions, aggressive fiscal austerity
measures and persistently high unemployment will continue to depress
activity in the near-term.
Spain's three-year and counting housing slump shows no sign of letting
up. Following steep price declines from 2008-2010, average
inflation-adjusted home prices were down more than eight per cent y/y
in Q1. Prices are likely to fall further in the coming year given a
massive glut of unsold homes, soaring double-digit unemployment, the
elimination of mortgage funding for low income families at the
beginning of 2011 and a dearth of foreign vacation property buyers.
Average home prices were also still declining in Italy as of the end of
Not all residential property markets are in negative territory, as the
housing recovery continues in some of Europe's better performing
economies. In France, average real prices were up seven per cent y/y in
Q1, though weakening global growth expectations may limit further price
gains in the near-term. In Germany, for which only annual price data
are available, real home prices increased in 2010 for first time in
over a decade. Demand and pricing have firmed alongside a strong
economy, rising exports and the lowest unemployment rate in three
decades. Nonetheless, Germany's declining population will limit the
extent of sustainable price appreciation in coming years.
Switzerland reported steady real price increases averaging four per cent
y/y through Q1, while prices in Sweden were unchanged from a year
earlier. Irish property prices rebounded sharply — and unexpectedly —
in the latter half of 2010, albeit following double-digit declines in
both 2008 and 2009. With the Irish economy still marred in recession,
and facing an oversupply of housing, the recent upturn will likely
prove temporary despite the best housing affordability in a decade.
Stateside, U.S. real estate markets have softened again after some
encouraging signs of bottoming last year. Average inflation-adjusted
home prices were down five per cent y/y in Q1. High unemployment and
tight credit availability are restraining demand, while a large volume
of distressed properties is adding to the downward pressure on prices.
"The modest pickup in sales in the U.S. over the past six months has
been primarily of investor-driven foreclosed properties, with little
evidence of broader homebuyer activity since the expiry of purchase
incentives in early 2010," commented Ms. Warren. "Despite gradually
improving job markets and near record housing affordability, the
expected addition of at least another one million foreclosed properties
to the market this year suggests more downside price risk in 2011."
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, firstname.lastname@example.org
Joe Konecny, Scotiabank Media Communications, (416) 933-1795, email@example.com