Housing markets in several developed countries around the world are showing signs of a tentative but growing stabilization, a Bank of Nova Scotia report said Thursday.

“Real home prices increased in a number of major developed economies in the second quarter of 2009, including Canada, Australia and the United States,” said Adrienne Warren, senior economist, Scotia Economics.

“Indeed, signs of a bottoming in home prices are likely now bringing some fence-sitters off the sidelines,” Warren added.

In many markets, housing valuation measures such as price-to-rent and price-to-income ratios suggest some overvaluation, she said.

In addition, excess production capacity will keep a lid on inflationary pressures for some time. That should allow central bankers to keep interest rates low, which should further support the housing market, the bank noted.

But the housing rebound will be constrained by a renewed focus on reducing debt and rebuilding household savings, Warren said. Another rein on prices will be that unemployment remains high and will be slow to decline so buyers will remain cautious.

The bank says the firmer house pricing is evidence of growing confidence in the sustainability of a global economic recovery that appears to be underway.

IE