While global housing activity in early 2013 has been mixed, Canada’s housing demand remains healthy said a Global Real Estate Trends report released by Scotiabank.
The report found in the majority of world markets housing conditions are “fairly steady” and average home prices relatively flat. However in countries like Asia and Latin America as well as the United States, home prices are again accelerating supported by a stronger domestic economy. In other countries, namely struggling nations of southern Europe, price declines are continuing.
“Highly stimulative monetary policy conditions, reinforced by additional easing measures internationally through the spring, should provide support to the interest-sensitive housing sector,” said Adrienne Warren, senior economist at Scotiabank. “However a fast and more synchronized improvement is contingent on a strengthening in global economic activity, labour markets and consumer confidence. Even then, high unemployment and tight credit conditions in many countries will restrain the pace of recovery.”
The report shows Canada’s inflation -adjusted home prices were unchanged in the first quarter of 2013 compared to the same time last year. Canada’s demand remains healthy but “cooled amid tougher mortgage refinancing rules and slowing employment and income growth.”
Year-to-date starts in Canada are so far led by Toronto with 26,850 followed by Vancouver (16,452), Edmonton (13,056), Montreal (12,855) and Calgary (10,716). The report took a look at the “rebalancing” underway in Toronto’s housing market in the wake of affordability pressures, inventory build, changes to mortgage insurance rules and more cautions lending policies.
“Sales and construction have already shifted notably lower in Toronto and prices are beginning to level out,” said Warren. “We expect this adjustment process to continue into mid-decade with downside risk to prices, particularly in the condominium market where supply additions are expected to outpace underlying demand.”
Mortgage changes announced by Federal Finance Minister Jim Flaherty last June include the reduction of the maximum amortization period from 30 to 25 years. Canadians were also limited in the amount they can borrow when refinancing their homes with the number decreasing from 85 per cent of the value of the home to 80 per cent.
In the United States, the report found real home prices in the first quarter of the year increased at their fastest pace in more than a decade at eight per cent year-over-year.
“The fundamentals for continuing recovery remain in place, though we expect more moderate investor demand and increased supply will slow the rate of price increase by the latter half of the year,” said the report.