Global housing market stabilizing

Global housing market stabilizing: Scotia Economics

Financial Post October 1, 2009

OTTAWA -- The housing market was the leading edge of the economic meltdown, and now signs that the

global market is stabilizing could signal a broader economic recovery, according to a report released Thursday

by Scotia Economics.

There are “tentative but growing” signs that housing markets are stabilizing in Canada and internationally, says

the Global Real Estate Trends report from Scotia Economics which looks at the trend in 10 developed countries.

Home prices are increasing in some countries in the second quarter, including Canada, Australia and the United

States, and while they’re still falling in others -- the U.K., France and Spain, for example -- the rate of decline is

slowing, said Adrienne Warren, a senior economist with Scotia Economics.

While prices are still lower than they were this time last year, “even a stabilization in housing prices, demand

and construction would be highly supportive of a broader economic recovery, particularly as the near-term fuel

provided by government stimulus spending and inventory rebuilding begins to fade,” the report says.

“Home ownership is a crucial sector of national economies and an important source of wealth for many

households, influencing spending, saving and borrowing decisions,” said Ms. Warren. “It also has significant

spillover to other domestic industries, including retail sales, finance and insurance, and a range of professional

and household services.”

Record-low interest prices, homebuyer tax incentives and lower housing prices are spurring a revitalized

demand, the report says, but there are still obstacles to a more solid recovery -- continued uncertainty in the

labour market makes people more cautious about borrowing and banks are still cautious about lending.

Before new-home construction can bring its benefits to the greater economy, there is still a large inventory of

existing homes on the market, left over from years of accelerated construction to meet the demand during the

housing boom, the report says. There is also a general sense that some markets are still over-valued despite the

fall in prices, it adds.

In Canada, new home construction has started up again, though the growth action in real estate so far is with

sales of existing homes, though Ms. Warren expects that to balance out next year. An increased number of

listings should also “cool” price increases, she said.

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