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A house for sale in Bridgetown, N.S.PAUL DARROW/The Globe and Mail

The Canadian housing market is on the wrong side of the ledger in a survey of global housing prices for the first time since 2008, down 2 per cent from the same time last year when adjusted for inflation as stricter borrowing rules and fading demand cool the market.

The report from Scotia Economics underlines the difficulties facing markets around the world. 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.

Canada's housing market has been on a tear since the end of the recession, with prices well above pre-recession lows in centres such as Vancouver and Toronto. But the boom has fuelled speculation that the country's market is overvalued, and economists have been anxiously watching for signs of weakness.

"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."

While the dip is small in Canada, the problems are worsening in other markets covered in the survey. House prices in Ireland have taken a 19 per cent hit, and the country faces a deeper housing slump than the one that hobbled the United States.

"The cumulative decline in prices from their early 2007 peak has reached a staggering 50 per cent," the report states. "The share of mortgages in arrears three or more months climbed to 10 per cent at quarter end, double the comparable U.S. delinquency rate at its peak in early 2010."

Other markets seeing sharp declines in the last quarter included Spain, China, Australia, Sweden, the United Kingdom, United States, Japan, Thailand, France, Mexico and Indonesia.Chile, South Korea and Switzerland eked out gains.

"The intensifying euro zone debt crisis, increasing financial market strains and moderating global growth suggest there is more downside risk to property prices in the near term," the report states.

"Eventually, however, improved housing affordability and pent-up demand will put many of these markets on a firmer footing. The era of ultralow borrowing costs in most developed economies is expected to persist for longer, while many developing economies are moving to reverse prior rate hikes."

Highlights from the report:

"China's housing market continues to cool. Adjusted for inflation, the average price of second-hand homes in Beijing were down 7 per cent. 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 battered U.S. housing market is showing increasing signs of stabilization. Real home price declines slowed to just 3 per cent following an 8 per cent drop in the second half of 2011. The steadying in prices has been accompanied by a gradual, albeit moderate, strengthening in sales.

Switzerland is the only European market in our sample to report appreciating home prices in early 2012. However, Swiss housing also experienced relatively moderate price increases over the past decade, suggesting less overvaluation in current pricing. A low home ownership rate of around 40 per cent, combined with restrictive foreign ownership rules, contribute to its more stable housing market."