Canada’s housing market roller coaster is a regular headline topper – but how does it compare to property markets around the world? According to Scotiabank’s Global Real Estate Trends report, some of our global counterparts are strengthening, despite lingering post-recession economic woes.
“Despite the sluggish pace of economic activity and elevated financial market volatility, inflation-adjusted home prices strengthened year-over-year in the second quarter in the majority of countries we survey,” says Adrienne Warren, a senior economist at Scotiabank.
On The Home Front
In Canada, we’ve seen Q2 year-over-year inflation-adjusted home prices rise 2.5 per cent, as sales show no sign of slowing, despite economist warnings of a market downturn. Home prices are still within historical norms, but mortgage interest rates are slowly meandering upwards. This has led to economists to call for a slight cooling of the housing market next year thanks to “slowing job growth and the recent uptick in fixed mortgage rates.”
As well, an overheated condo market in Canada’s major metropolises could be setting the stage for vulnerability.
“Potential overbuilding of condominiums in a number of major urban centres remains a concern, especially in light of recent evidence that demand is ebbing,” says Warren. “In Toronto, where reasonably good data on new home sales are available, purchases of both new low-rise and high-rise homes have fallen sharply over the past year. Sales of resale condominiums are holding up better, evidence that demand by owner occupiers remains healthy.”
United States: Taking Steps Toward Recovery
Compared globally, U.S. housing prices sit near the top, as inflation adjusted home prices climbed eight per cent in the second quarter.
“Demand is being bolstered by moderate job growth and near record housing affordability, while low inventories and fewer distressed sales are supporting prices,” says the report. “We expect rising mortgage rates will moderate, but not derail the recovery, which is still in its early stages from a cyclical standpoint.”
Improving household finances, increased consumer confidence and rosier lending conditions stateside is also bolstering demand.
United Kingdom – Government Steps To Sustain The Market
Despite claims the government’s “Help to Buy” stimulus measures are setting the U.K. on course for another housing bubble, real estate prices saw a 5.9 percent increase in the second quarter or 2013 – the first time prices were above year-ago prices in 2.5 years.
Ireland: High Debt And Low Demand
Housing prices in the emerald isle seem to be touching the bottom as demand sluggishly picks up. There’s also a high instance of mortgage defaults, as owners find themselves cash strapped and unable to pay for their homes.
“…record mortgage arrears topping 12 per cent of outstanding loans are a significant hurdle to a sustainable housing recovery,” says the report.
However, while home prices are still falling, depreciation has slowed to only 0.9 per cent in Q2 compared to four per cent in Q1.
Sweden and Switzerland: Steady Growth
Both countries saw steady price growth in the second quarter with Sweden seeing a 3.3 per cent increase in inflation-adjusted prices in Q2 and inflation adjusted house prices rising by 5.9 per cent in Switzerland during that same period.
Spain: A Struggling Economy
A decade removed from its aggressive home building campaign, Spain isn’t in great shape. With the property market in a “deep slump” and the nation’s unemployment rate hanging over 25 per cent – prospects are grim.
Asia: Sustained Growth
Despite slowing regional growth, property markets in Asia are surviving. China saw a 10.2 per cent increase in inflation adjusted property prices in the second quarter of 2013 – the highest on the board for the quarter. To the south, Indonesia and Thailand also gained momentum during the period. India and South Korea on the other hand saw a slight contraction in prices.
Latin America: Small Victories
Relatively solid housing demand coupled with modestly positive labour markets have helped to raise property prices in Chile, Peru and Columbia – unfortunately not so much in Brazil, where a weakening economy and high interest rates have stunted the previously booming market. “House prices in Mexico are flat, with modest nominal price appreciation eroded by persistent inflation,” says the report.