Most leading global real estate markets showing signs of recovery

Leading real estate markets that were hard hit at the height of the global economic downturn are now showing positive signs of recovery, according to a new report.

But the overall picture is mixed. While countries such as Australia, Canada, France, Sweden, Switzerland and the United Kingdom experienced a measure of house price growth, indicating a recovery, prices fell in Japan, Italy and Ireland. The real estate markets in the United States and Germany saw no overall movements in 2010 but the outlook is favourable, the report by Canadian finance house Scotiabank shows.

The housing market in advanced economies showed ‘a modest but uneven recovery in 2010,’ says the Global Real Estate Trends report that looked at the housing markets of 12 leading global economies for the year 2010.

There was a climate of muted economic growth with record low interest rates providing some support for global property markets. But the rebound lost some steam in the latter half of the year. ‘Despite still attractive borrowing costs, the expiry of purchase incentives in many markets, the relatively slow pace of job creation and mounting concerns over the financial strains facing debt-heavy developed nations are weighing on confidence. These factors will likely keep many prospective buyers on the sidelines in 2011,’ the report says.

Australia was seen to lead the way in house price growth with low unemployment and tight supply adding to the upward pressure on prices. ‘Housing demand is being supported by low unemployment, while tight supply is adding to the upward pressure on prices,’ the report points out.

Germany is expected to see a recovery as its long term housing market slum reverses. ‘While official house price data are only available with a considerable lag, private survey estimates suggest some firming in recent quarters, as solid export driven growth bolstered employment and confidence. While the average euro zone unemployment rate has risen to a twelve year high of just over 10%, Germany’s jobless rate, at 7.5%, is near its lowest level in almost two decades,’ the report explains.

Activity remains reasonably buoyant in a number of other European markets. In France, the housing recovery continued to gather momentum through the third quarter, with average inflation adjusted prices up 6.8% year on year while in Switzerland prices are tracking in a fairly steady 4 to 6% range.

In contrast, the hardest hit European markets prices continue to trend down. In Spain, average inflation adjusted prices in the third quarter of 2010 were 5.2% lower than a year earlier, while Ireland is still reporting double digit declines. Weak domestic demand, housing oversupply and high unemployment suggest further price declines in the New Year. Average prices also continue to fall in Italy.

The United States was also seen to have a positive outlook for 2011 with an improving employment picture and low interest rates supporting an increase in demand. ‘Some long awaited stability finally appears to have returned to US property markets. Average inflation adjusted home prices were essentially flat year on year in quarter three and are unchanged on a year to date basis,’ the report says.

But there is a hint of concern. ‘While this semblance of normalcy is encouraging after the
near-30% cumulative price correction of the prior four years, a weak job market and the expiry of the home buyers’ tax credit at the end of April have kept overall sales at relatively depressed levels through the fall. Improving employment prospects in 2011 and continued ultra low interest are positive for the outlook for housing demand. Nonetheless, still high unemployment, cautious lending and a slower pace of household formation will limit the pickup in sales,’ it adds.