Global real estate trends

According to a recently released Global Real Estate Trends report from Scotia Economics, low interest rates and slowly improving economic conditions contributed to a slight global residential property market recovery.

From the 12 advanced nations polled, the estimated average inflation-adjusted home prices rose this year in six (Australia, Canada, France, Sweden, Switzerland and the U.K.), were stable in two (Germany and the United States) and dropped in four (Ireland, Italy, Japan and Spain). This is compared with 2009, when eight of the 12 markets suffered price declines.

The rebound lost some steam in the latter half of the year, mirroring the general loss of momentum in global growth, though regional performances remain highly varied," said Adrienne Warren, Senior Economist, Scotia Economics. "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."
Leading the pack for 2010 is the Australian housing market. This is attributed to things like low unemployment; similarly, lower housing supply is driving prices up. Other factors like consecutive interest rate increases by the Reserve Bank of Australia, and the end of enhanced First Home Owners Grant in January 2010, have brought some stability to a hot market. Average inflation-adjusted home prices in the third quarter of 2010 were up 9.4 % year over year compared with a 15.9 % increase in Q1.
"We anticipate a further slowing in sales and price appreciation in 2011," added Ms. Warren. "While Australia's close trade ties with Asia and resource wealth will continue to underpin a solid pace of domestic activity, higher interest rates will worsen already strained affordability. The RBA has recently taken pause, but we expect the resumption of a gradual policy tightening path in 2011, with short-term rates raising an additional 75 basis points by year-end."
Back at home in Canada, markets performed well, but were volatile. Contributing factors include an extraordinarily active winter and spring, anticipation of a hike in interest rates only partially materialized, and BC and Ontario’s introduction of the HST- all made the summer markets weaker than usual. Things rebounded in the fall, to bring back stability to the markets.
"We are neither overtly optimistic nor pessimistic regarding the outlook for 2011," stated Ms. Warren. "On the one hand, we expect interest rates to remain at historically low levels, with the Bank of Canada deferring any further rate hikes to late 2011 given an uncertain global economic outlook and subdued inflation, and longer-term borrowing costs drifting up only modestly. This is an extremely powerful inducement for both first-time and move-up buyers and should maintain a decent level of sales.”

There is expectation that demand will be affected by moderate employment and income growth .Public sector hiring was responsible for a third of the net new jobs created in Canada over the past year, - which is likely a one-time thing.

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Repeal of Toronto's infamous Land Transfer Tax!

These are interesting times at Toronto City Hall. Last fall’s election brought a new mayor and numerous new councillors, and they are promising to take the city in a new direction.

In this regard, one of Mayor Rob Ford’s most significant promises was to repeal the Toronto land transfer tax, an unfair tax that realtors have fought against since it was first proposed. We continue to oppose this tax and we look forward to working with the mayor to eliminate it.

Realtors were again hard at work on this issue recently, making our views known as part of the city’s 2011 budget process. In a deputation to the City of Toronto’s budget committee earlier this week, the Toronto Real Estate Board (TREB) told councillors that realtors are encouraged with the direction of the city’s proposed 2011 budget and believe that it is a significant step towards fulfilling Ford’s strong commitment to repeal the land transfer tax.

By demonstrating restraint and prudent fiscal management, the city’s proposed budget sets the stage for council to deliver on Ford’s clear commitment to repeal the land transfer tax by next year.

For years, GTA realtors have been telling the city that the fair way for it to address its financial challenges is to get its finances in order, instead of burdening homeowners and homebuyers with additional taxes.

Realtors fought strongly against the idea of a land transfer tax when it was first proposed in 2007. We heard the public’s concerns and we stood up for homebuyers, who we believe were being unfairly targeted by this tax. TREB’s efforts were strongly supported by the public, who also spoke out strongly against the tax. The public spoke loudly then, but they spoke even louder last October when they gave Ford an overwhelming and clear mandate.

The city’s proposed 2011 budget is an important step to delivering on the mayor’s mandate. In particular, it begins the process of addressing the city’s financial challenges with fair options, including cost-containment measures. Furthermore, it sets the stage for a forthcoming detailed program and service review, which Ford has announced will begin in March. This is an important process, and one that realtors have been calling for.

For years, Toronto’s taxpayers have been bearing the burden of unsustainable city budgets. We believe that the proposed 2011 budget stops the bleeding and that by moving forward with Ford’s commitments, including repealing the land transfer tax, next year’s budget will allow the city to flourish.

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