Canadian house prices are down nearly two percent from the same time a year ago when adjusted for inflation as stricter borrowing rules and fading demand cool the market, according to a new Scotiabank real estate report released Wednesday.
The average home price adjusted for inflation fell by 1.6 percent in the first quarter of 2012. Weakness in real estate markets is a direct threat to the banks that financed housing booms around the world, as bad loans threaten their balance sheets.
This is the first time since 2008 that prices have declined year-over-year in Canada, the world’s 10th largest economy.
“Despite historically low borrowing costs, demand has been tempered by moderate income growth and tighter mortgage insurance rules,” the report states about Canada’s market.
“Supply conditions are becoming better balanced in most parts of the country. We anticipate fairly flat sales and average prices over the latter half of the year.”
Across the globe, house prices in Ireland dropped 19 percent and prices in Spain, which has experienced a housing crash, fell 9.1 percent year-over-year. Switzerland is the only European market to record appreciating home prices in early 2012.
In the U.S., prices dropped 3 percent following an 8-percent drop in the second half of 2011.
“China’s housing market continues to cool. Adjusted for inflation, the average price of second-hand homes in Beijing were down 7 percent. The deflating of China’s property boom over the past year follows a number of official measures aimed at reining in credit growth and speculative activity, including stricter residency requirements for buyers and limits on second-home purchases,” the report said.
