Global Real Estate Markets-How Can We Compare

26 May 2010

The Scotiabank Group has just released a study on housing markets around the world for the First Quarter of 2010. While I personally hate average prices and price changes by country (I am a much more of a micro type – condos in particular), these country comparisons do provide some insights and put our real estate market in a global perspective. Australia leads the way with an annualized increase of 17.1% for Q1 over Q1 of 2009. Canada was second at 16.6%. But Canada’s percentage was lower than Q4 of 2009 which was 19.4%. Yes price increases are slowing in Canada and for the 2010 year the number will probably average closer to 10%. The U.K. market also moved back into the black with Q1 prices up 4.2% versus a drop of 1.6% in Q4 of 2009. The U.S. market is also showing some improvement. In Q1 of 2010 the price decline was just 1.1% compared with a drop of 4.6% in Q4. Has the U.S. market reached a bottom? That’s the problem with wide averages like this. We can tell you that those few U.S. markets that still have to work their way through more foreclosures will experience further price declines. On the other hand, prices are now moving up in many parts of the country – hence the neutral number ‘on average’!! The interesting point for me in this Report is the performance of Australia. Did you know that their Central Bank Rate – the equivalent of our Bank of Canada Rate – is 4.5% (the low in 2009 was 3.0%). Compare that to our Rate of a quarter of 1% (.25%) and we are afraid of it moving up too fast? Mortgage Rates in Australia range from 6.3% for variable up to 7.9% for five year fixed! What does that tell you about the impact of higher rates on real estate and condo or housing prices? That too is a topic for another blog. What do you think will be the impact of rising mortgage rates on our real estate and condo markets?