This article appeared in the Toronto Sun on Tuesday, September 27th, 2011.
Canada’s property market is cooling, but still stands out as one of the best performing in the developed world, according to a report by Scotia Economics.
Existing home prices rose 5% in the second quarter, the same pace as gains in the first quarter of the year, the bank’s Global Real Estate Report found. Figures for July and August point to stable sales and a levelling out of prices.
Out of the nine markets studied in the report only Canada, France and Switzerland recorded price gains in the second quarter.
“In the majority of the major markets we track in North America, Europe and Australasia, inflation-adjusted home prices declined on a year-over-year basis in the second quarter of 2011,” said Adrienne Warren, senior economist and real estate specialist at Scotia Economics. “While Canada’s hot housing market also has begun to cool, it remains a notable outperformer.”
Warren said in many markets historically low interest rates coupled with a slump in prices has made homes more affordable. In normal times that would probably be enough to jump-start the market, she said.
However, these aren’t normal times and the ongoing uncertainty created by the financial crisis in Europe and high unemployment have convinced many consumers to save and pay off debt rather than make major purchases.
“Heightened economic uncertainty combined with recent signs of a loss of momentum in Canada’s jobs market could keep some potential buyers on the sidelines for the time being,” she said, adding that the bank is forecasting a slight slowdown in sales and flat prices for the rest of the year.
France so far has managed to buck the trend of slumping property prices in the euro zone, with real estate rising 5% year-over-year in the second quarter. Switzerland’s property prices rose 4%.
Elsewhere the slump showed little signs of slowing in the second quarter, with prices in Spain tumbling 10% after a 9% slide in the first quarter.
Ireland’s property slide also accelerated with a 14% drop in the second quarter following a 12% decline in the first.
In the U.S., second-quarter property prices fell 6%.