Montreal housing for sale.Christinne Muschi
Chart 1: Canada No. 1 in housing
The slow pace of economic recovery, the European sovereign debt crisis and other confidence-rattling events have dented housing markets in most of the world's developed economies.
Canada has been a notable outperformer, but the housing market here is also expected to weaken in coming months, says Bank of Nova Scotia economist Adrienne Warren.
In the third quarter, average inflation-adjusted home prices were below year-ago levels in seven of 10 advanced nations, Ms. Warren writes in a recent report.
Only Canada, France and Switzerland boasted prices above the year-ago period.
Canada saw its real home prices rise 4.8 per cent year-over-year in the third quarter, but that kind of performance likely won't last, Ms. Warren warns.
"While the sector's continued buoyancy is impressive, monthly data through November suggest prices have leveled off since the spring, with conditions in the majority of local markets in 'balanced' territory," she writes.
"Ultra-low interest rates are still attracting buyers, but increased economic uncertainty combined with some recent slowing in the pace of hiring could dampen demand in the new year."
Chart 2: The Korean question
The death of North Korea's Dear Leader, Kim Jong-il, has injected new uncertainty into the fragile geopolitics of the region.
A key question is whether new leadership in the form of Kim Jong-un, the young and inexperienced son of Kim Jong-il, will accelerate reform, maintain the status quo or increase the risk of economic collapse, says Capital Economics' Sukhy Ubhi.
A total economic meltdown cannot be ruled out, he says. And should a collapse take place, leading to forced reunification with South Korea, the immediate costs would be massive.
"The gulf between the two Koreas is far greater than that between West and East Germany ahead of their reunification. Per capita income levels in West Germany were three times those in the East, whereas in South Korea they are 19 times the level of the North," he writes in a recent update.
The South Korean government estimates the cost of rebuilding the North's economy and preventing a mass post-reunification exodus to the South is about $1-trillion (U.S.).
That's roughly South Korea's annual GDP and, in proportional terms, is two or three times most estimates of the cost of German reunification, Mr. Ubhi points out.
"For now, the most likely outcome is the maintenance of the uncomfortable status quo," he says.
Chart 3: Chinese growth on the upswing
Europe's sovereign debt crisis would ordinarily be a drag on China's economic growth.
However, GDP continues to expand apace in the Asian nation thanks to strong domestic demand, says Oscar Sanchez of Bank of Nova Scotia.
"Evidence of well supported domestic demand conditions found in rising investment and credit flows ... points to a steady growth path for the Chinese economy," he writes in a recent research note.
Bank lending activity in real terms has stabilized over the past year, he points out. The flow of loans to the system bottomed out in July after falling in the previous 10 months.
China's tightening of monetary policy, spurred by inflationary pressures at the end of last year, caused banks to lend less. But inflation now seems under control and the flow of credit is changing course, Mr. Sanchez writes.
"Although when viewed from this short-term perspective, bank lending in China has been in contraction mode, when analyzed with a medium-term lens it seems evident that the economy is currently receiving about double the amount of loans as prior to the 2008-09 global recession. This is hardly a picture of deleveraging."
Bertrand Marotte