Economic Problems Continue to Pressure Global Real Estate Markets: Scotiabank Economists

TORONTO, June 13, 2012 /CNW/ - Many residential property markets around the world remain under considerable stress, according to the expanded Global Real Estate Trends report released today by Scotiabank. Home prices, adjusted for inflation, declined on a year-over-year (y/y) basis in the first quarter of 2012 in the majority of international markets tracked in the report.

"The ongoing strains are most pronounced in Europe, particularly in the recession-plagued peripheral economies," said Adrienne Warren, Senior Economist, Scotiabank. "Fiscal austerity measures, rising joblessness and tight credit conditions have sidelined potential buyers even as central banks maintain highly accommodative monetary policy settings."

Housing conditions have also cooled in Australia and, to a lesser extent Canada, according Ms. Warren. "Nevertheless, Canada's housing market remains an outperformer among developed nations. Adjusted for inflation, the national average house price fell two per cent y/y in the first quarter of 2012. Price trends are relatively steady in the majority of local markets, though a few, notably Toronto, continue to report strong appreciation."

The temperature has also been turned down on housing activity in many developing nations in Asia and Latin America, she said. This in part reflects successful efforts by authorities to rein in excessive property speculation through monetary restraint and/or regulatory measures. But it also mirrors an overall loss of economic momentum alongside the unwinding of earlier fiscal stimulus and reduced global trade flows.

"The intensifying euro zone debt crisis, increasing financial market strains and moderating global growth suggest there is more downside risk to property prices in the near-term," said Ms. Warren. "Eventually, however, improved housing affordability and pent-up demand will put many of these markets on a firmer footing." For example, the U.S. housing market has shown signs of stabilization in early 2012, though it will take more time to build renewed momentum.

The June 2012 issue of Global Real Estate Trends expands the report's international house price coverage to a number of emerging markets in Latin America and Asia.

Scotiabank economists and market strategists are located in Canada, the U.S., Mexico, Peru, Chile, Thailand, Hong Kong, the United Kingdom and France. The team provides in-depth commentary regarding the factors shaping the outlook for the global economy, currencies, capital markets and commodities as well as coverage of monetary and public policy issues.

Adrienne Warren, Scotiabank Economics, [phone], [email protected]; or Joe Konecny, Scotiabank Media Communications, [phone], [email protected].