Canada rocked by 'dramatic' housing slowdown, global report says
By Julie Fortier, Financial Post - Canada led in the global housing recovery in the first quarter of 2010, but moderating global growth, heightened financial market volatility and sluggish job creation have led to a "dramatic" slowdown in Canada, according to the Global Real Estate Trends report released Tuesday from Scotia Economics.
"Global real estate markets entered 2010 with a renewed sense of optimism, piggybacking on the broader economic recovery underway," Adrienne Warren, senior economist at Scotia Economics said in the report. "Housing demand and pricing improved in the first quarter of the year in the majority of the advanced nations we track, benefiting from ultralow interest rates, improved affordability, and in some cases, government purchase incentives."
Australia and Canada, with inflation-adjusted average home prices rising at double-digit rates, led the pack, echoing their relatively favourable employment and lending conditions. Sweden, Switzerland and the U.K. also saw home price increases, while U.S. and French markets reported small declines.
However, the global trend has reversed itself in recent months and Canada has seen home sales activity beginning to fall.
"The recent slowdown has been most dramatic in Canada," Warren noted. "Average home prices in (the second quarter) were up just 6.8 per cent year-over-year, compared with 16.6 per cent year-over-year in (the first quarter). Sales, while still at a high level, have trended steadily lower alongside reduced affordability and exhausted pent-up demand."
For instance, figures from the Canadian Real Estate Association released last month showed seasonally adjusted national home sales activity via the Multiple Listing Service Systems fall 8.2 per cent in June from the previous month. Sales fell in almost 70 per cent of local markets.
The Scotia report said hard-hit markets like the U.S., Spain and the U.K. are expected to take years to recover, while "in higher growth nations such as Canada and Australia, housing activity should prove much more subdued than in recent years."