While the Canadian residential real estate market remains relatively buoyant, it has shifted to a slower growth trajectory, says Adrienne Warren, senior economist at Bank of Nova Scotia.
The bank released its second-quarter survey of global housing trends Friday, and found that the number of countries reporting that house prices declined from last year outnumbered those reporting increases by more than two to one. Globally, weak consumer confidence, high unemployment and tight credit conditions continue to weigh heavily on housing demand and pricing, the report said.
Activity in Canada's housing market remains higher than in many, but growth is slowing. Adjusted for inflation, national average prices in the second quarter were two per cent lower than the same period a year ago, matching the first quarter's decline, the report noted.
Canadian housing demand has been tempered by a slower pace of job growth and the cumulative effects of tighter mortgage insurance rules over the past several years, while more balanced supply conditions in most parts of the country have restrained price increases, it said.
Ottawa's most recent round of mortgage insurance rule changes, which were designed to take some steam out of the market by, among other things, decreasing the maximum length of insured mortgages to 25 years, took effect in July – after the end of the second quarter. As a result of those and other factors, such as new mortgage underwriting requirements for banks, many economists are expecting the pace of housing activity here to slow.
European markets remain the weakest, while there were signs of modest improvement in countries such as the United States, the U.K., Australia and China, the Scotiabank report said.
But it added that it will likely take considerably more time for a sustainable recovery to emerge in the global market. Stronger job and income growth will be required to generate the consumer purchasing power that is needed to support higher home sales.