More 'Decliners' Than 'Gainers' In Global Property Markets: Scotiabank Economics

TORONTO, Sept. 14, 2012 /CNW/ - Global housing markets remained under strain in the second quarter, according to the latest Global Real Estate Trends report released today by Scotiabank.

"Among the international property markets we track, the number of countries reporting declining average real prices on a year-over-year (y/y) basis outnumbered those reporting price increases by more than two to one," said Adrienne Warren, Senior Economist at Scotiabank. "Weak consumer confidence, high unemployment and tight credit conditions continue to weigh heavily on housing demand and pricing." 

Canadian housing activity remains relatively buoyant, but has shifted to a slower growth trajectory. Adjusted for inflation, national average prices fell 2 per cent y/y in Q2, matching the first quarter decline. Housing demand has been tempered by a slower pace of job growth and the cumulative effects of tighter mortgage insurance rules over the past several years, while more balanced supply conditions in most parts of the country have restrained price increases.

"There were signs of modest improvement in a number of major markets, including the United States, the U.K., Australia and China," noted Ms. Warren. "Better housing affordability and renewed monetary policy easing in many developed nations, where ultra-low borrowing costs are being lowered even further, and emerging markets, where prior tightening is being reversed, have helped to stabilize market conditions."

Nonetheless, it will likely take considerably more time for a sustainable recovery to emerge. In particular, stronger job and income growth will be required to generate the household purchasing power to support higher home sales, as will an easing in the restrictive lending conditions in a number of countries that are limiting the pool of potential buyers.

According to the report, the U.S. housing market is showing increasing signs of recovery. Average inflation-adjusted home prices rose 3 per cent y/y in Q2, moving the U.S. from its persistent position at the low end of the international survey toward the top. This modest improvement follows steady price declines from 2006-2011 that saw average real prices drop a cumulative 35 per cent from their peak. Even so, it will take more time to build renewed momentum given the slow pace of job creation, persistently tight credit conditions and a still long pipeline of foreclosed properties.

Housing markets remain weakest in Europe, where sharp fiscal austerity, rising unemployment and financial sector strains are deepening recessionary conditions. In Ireland, average inflation-adjusted house prices slumped 17 per cent y/y in Q2, only marginally less than the first quarter's 19 per cent decline. The cumulative decline in prices from their early 2007 peak now exceeds 50 per cent.

Spain's property bust also shows no sign of letting up. Real house prices fell 10 per cent y/y in Q2, bringing the cumulative drop over the past five years to over 30 per cent. Facing a deep recession, a record unemployment rate of 25 per cent and a large overhang of unsold homes, there is little relief on the horizon. In France, average prices fell 2 per cent y/y in Q2, the second consecutive quarter of decline. 

"In European countries that are financially sound, there were some tentative signs of improvement," added Ms. Warren. "Real house prices in Sweden stabilized in Q2, though were still down 4 per cent y/y. U.K. property prices edged up slightly in the quarter, and were down only 1 per cent y/y, the smallest contraction since 2010." 

Home prices also steadied in Australia in Q2 following moderate declines over the prior five quarters, but were still down 3 per cent y/y in inflation-adjusted terms. Demand is being buoyed by central bank interest rate cuts totalling 125 basis points since last fall, a relatively robust domestic labour market and ongoing strength in the resource sector. 

Asia's property market performance was mixed. An increasing number of cities in China are seeing renewed home price appreciation. This is being supported by an easing in monetary conditions (i.e. lowering of the reference rate and bank reserve requirements), though average real prices in the majority of major centres were still below year-ago levels in Q2.

Housing markets in Latin America were relatively stable though mid-year. Inflation-adjusted average prices in Chile (Greater Santiago) were up 2 per cent y/y in Q2, unchanged from Q1 but a notable slowdown from 2011. Average prices in Mexico were flat in Q2, a slight improvement from the 1 per cent y/y decline recorded in Q1. Both countries continue to report relatively solid domestic growth, though global economic uncertainty is weighing on buyer confidence. 

Scotiabank 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.

Scotiabank is one of North America's premier financial institutions and Canada's most international bank. With more than 81,000 employees, Scotiabank and its affiliates serve some 19 million customers in more than 55 countries around the world. Scotiabank offers a broad range of products and services including personal, commercial, corporate and investment banking. With assets of $670 billion (as at July 31, 2012), Scotiabank trades on the Toronto (BNS) and New York Exchanges (BNS). For more information please visit

SOURCE: Scotiabank - Economic Reports

For further information:

Adrienne Warren, Scotiabank Economics, (416) 866-4315,; or
Devinder Lamsar, Scotiabank Media Communications, (416) 933-1171,

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