Canada and International Housing Markets

November 24, 2009

The world’s housing markets are showing signs of recovery.
photo by "pah"

The world’s housing markets are showing signs of recovery. The numbers differ from country to country and some are more optimistic than other. In most countries, it’s still much cheaper to rent a house than to buy one of equal size and quality. This is a consequence of a low rent price and a high mortgage rate.

What’s going on around the world?

United States

In some parts of the United States, yearly rents are at 3% of the purchase price whereas the mortgage rates are at 6% making it twice as expansive to borrow the money as to borrow the house. Although the US housing market began to turn positive 6 months ago it still faces many problems. The worst case scenario predicts a 10% price fall in house pricing. What may save the situation is the number of first-time buyers which has increased significantly. Currently, three out of five home sales are now to first-time buyers compared with one in five in a typical market.

Europe

House prices across Britain have gone into reverse for the past few months, in October of this year they rose by 1.2% making it the fourth consecutive month in which prices had increased. The surprisingly quick recovery of house prices is mainly due to low interest rates and lack of supply. Many wonder whether the recovery will continue in winter when the housing market usually slows. The construction spending for the 2012 Olympics give a big hope for the continual recovery.

On the other hand, Ireland is suffering its worst recession in recent history which affecting the house prices greatly. The prices fell an unbelievable 24% compared to February of 2007. When other countries started showing the signs of recovery in August of this year, Ireland saw the worst monthly price fall ever. The increased supply of rental houses, rent decline, the unemployment rate of 13% (expected to rise to 15% in 2010) are just some of the very worrying facts that keep the housing market from recovering.

Unfortunately, Spain is in a similar position as Ireland. The number of unsold properties in Spain now exceeds 1.5 million. But despite this huge pool of inventory, realtors report a price decline of just 14.5% since the peak in July of 2007. The unemployment rate of 19.7% stands at one of the highest rates in Europe and is expected to exceed 21% in 2010. The future does not look very bright for this country’s market but realtors keep hoping that low interest rates will attract more people to homeownership.

Asia

The house prices in China started falling in September 2008 but have already seen price increase in Q2 of this year. This is mainly due to increased government spending and the economy which even in these times saw a staggering 7.1% GDP growth during the first half of 2009.

Winners

Some countries completely avoided the housing market crisis and have easily sailed through the global recession. Israel, Switzerland, Indonesia and Norway have all seen increases in house prices at a slower rate in the first and second quarter of this year. Leading the worldwide statistics is Israel where the average price of houses rose 8.40% year-on-year to end-Q2 2009.

Where does Canada fit in?

Toronto

Canada places somewhere in the middle when it comes to the statistics of the housing market recovery numbers. Home sales began rising in February 2009 and resale house prices started recovering in May 2009. While prices of existing houses are rising, the newly built ones were seeing a declining state till September of this year when a 0.5% rise has been reported showing that the house market is finally strengthening. According to reports from different provinces, Newfoundland registered the biggest price rises (12.7%), followed by British Columbia (11.7%), Manitoba (10.8%) and New Brunswick (8.5%).

All provinces recorded healthy price increases except for Alberta, which experienced a mere 0.2% price rise over the period. The reason Alberta’s house prices did not see a noticeable increase is the canceling of oil and gas exploration projects, poor economy in this region and strong rental market.

Even though the Canadian economy has been dragged down by the US (largest trading partner), the housing prices and sales levels have begun to stabilize. Economic recovery in Canada is expected to be slow and fragile but the housing market is expected to continue to rise for the rest of 2009 and fully recover in 2010. Whether this recovery will be sustained is the big question.

You might also like

1. Housing Situation Report in Canada
2. Housing to Return to Normal
3. Housing Market Continuing Its Recovery
4. Housing Market to Worsen
5. Inflation in Canada

Posted in International Real Estate, Toronto Real Estate News | No Comments »