The Luxury Insider: There’s No Place Like Home!

You’ll be happy to know that, in spite of the grey clouds obscuring the market every now & then, US real estate is faring pretty well, relative to what is going on elsewhere in the world.

After five years of decline, both in terms of units and volume of sales, we have experienced a transition-type market in 2011. It was step one of a recovery process which is taking hold this year and spreading on the national map, although unevenly. The progressive absorption of the excess distressed inventory, combined with record low mortgage rates and increased affordability have finally produced a much needed stabilization.

The market is still fragile to be sure, as it reflects the fluctuations of the economy, but the most relevant indicators are pointing to continued improvement. Investors are having the year of their lives buying right and left and well-to-do foreigners are rushing to buy a piece of America, particularly in the high end. In California and the East Coast, they account for a major fraction of the qualified demand in the million dollar price range.

We are more fortunate here than in most other countries where the global financial crisis is still doing some damage in the real estate arena. It’s a domino effect that is spreading one continent at a time and one country at a time. Only a handful of countries have managed to report a price appreciation in the first half of 2012. All others remain under a great deal of stress.

An interesting study was recently released by Scotiabank, under the signature of Adrienne Warren, relative to global real estate trends. It gives a good photo of the present real estate market status around the globe . Being that the info derives from a variety of state entities (institutes of statistics, real estate associations, national banks, etc.) which are slow to publish results, some of the info may have changed somewhat as it pertains to the first part of 2012. Here it goes:

  • China: The housing market continues to cool. Adjusted for inflation, the average price of second-hand homes in Beijing was down 7% year over year in Q1. 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.
  • India: Housing pressures have eased amid moderating demand and increasing supply. Average home price appreciation slowed to 4% y/y.
  • Canada: The housing market remains an outperformer among developed nations but conditions here too have cooled. Adjusted for inflation, the national average house price fell 2% y/y in Q1.
  • Mexico: The residential property market recovery has lost momentum. Real estate prices dipped marginally below year ago levels for the first time in two years. Sluggish US growth and uncertainty have added a note of caution.
  • Australia: The housing market continues to deflate. Real estate prices slid for a fifth consecutive quarter in Q1. Interest rates cuts by the Reserve Bank totaling over a percentage point since November, should provide some relief, but weak affordability and a softening job market will likely keep many potential buyers on the sidelines.
  • United Kingdom: Property prices stabilized in the first quarter but were still down 4% year over year.
  • France: Here also, prices dipped slightly below year ago levels for the first time in two years.
  • Spain: The property bust is showing no sign of letting up. Prices fell 9% y/y in Q1, bringing the cumulative drop over the past four years to almost 30%. With unemployment approaching a record 25% and a massive glut of unsold homes, it appears prices have further to fall.

Fiscal austerity measures, rising joblessness and tight credit conditions have sidelined a lot of would-be-buyers and would-be-sellers worldwide.

Even though there is no reason to start dancing on the streets, we (the US) practically look like the shiny star in the Universe… I know that being better off than the rest of the world is hardly satisfying, but I’ll take it!