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Presenting The Most Overvalued Housing Market In The World In One Chart
Submitted by Jeff Desjardins of Visual Capitalist
Canada has the Most Overvalued Housing Market in World
In every inflating bubble, there’s usually two camps. The first group points out various metrics suggesting something is inherently unsustainable, while the second reiterates that this time, it is different.
After all, if everyone always agreed on these things, then no one would do the buying to perpetuate the bubble’s expansion. The Canadian housing bubble has been no exception to this, and the war of words is starting to heat up.
On one side of the ring, we have The Economist, that came out last week saying Canada has the most overvalued housing market in the world. After crunching the data in housing markets in 26 nations, The Economist has determined that Canada’s property market is the most overvalued in terms of rent prices (+89%), and the third most overvalued in terms of incomes (+35%). They have mentioned in the past that the market has looked bubbly for some time, but finally Canada is officially at the top of their list.
Of course, The Economist is not the only fighter on this side of the ring.
Just over a month ago, the IMF sounded a fresh alarm on Canada’s housing market by saying that household debt is well above that of other countries. Meanwhile, seven in ten mortgage lenders in Canada have expressed “concerns” that the real estate sector is in a bubble that could burst at any time. Deutsch Bank estimates the market is 67% overvalued and readily offers seven reasons why Canada is in trouble. Even hedge funds are starting to find ways to short the market in anticipation of an upcoming collapse. Canada’s housing situation could give rise to the world’s next Steve Eisman, Eugene Xu, or Greg Lippmann.
On the opposing side of the ring, who will contend that the Canadian housing market is just different this time? Hint: look to the banks and government.
Stephen Harper, Canada’s Prime Minister, has tried to dispel fears. He recently told a business audience in New York that he didn’t anticipate any housing crisis in Canada.
Just this week, the Bank of Canada also tried its best to deflate housing bubble fears. “We don’t believe we’re in a bubble,” says Stephen Poloz, the Bank’s Governor. “Our housing construction has stayed very much in line with our estimates of demographic demand.”
Poloz suggested that housing costs do not necessarily have to contract to match the incomes of Canadians. Instead, he expects growth in the economy to raise wages and make housing more affordable.
Strangely enough, by the Bank of Canada’s own estimate, the housing market is overvalued by as much as 30%. It is hard for housing to become more affordable when prices are rising in double digits in a year. Combine this with the fact that household debt rates keep setting new records, and one side of the fight might get tilted sooner than later.
Courtesy of: Visual Capitalist
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Asian buyers aren't that price sensitive. They are buying pairs of houses in Vancouver, tearing them down and building larger houses on double lots. It's happening everywhere. When Asian (Chinese) demand goes bust, so will the Vancouver housing market. Not a day before.
As long as the CBs want to manipulate and prop up housing and hand out a flood of money to special interest people, the bubble may not pop. However, ultimately this will correct and correct hard.
Can't fight inevitability forever.
Credit as money mostly relates to Real Estate.
Since people can bid on property, and a loan can be 30 years or so, then the person who wins the bid, gets the property. Effectively, the winning bidder is the one who takes on the most debt. The real winner in this scenario is banker. Why, because the usury is front loaded onto the loan. This usury passes through debtor’s double entry ledger and lands on bankers. Only on the back end of the loan does the principle start to decrement. For a thirty year loan, the usury could be as much as double the principle. Effectively, whole populations are vectoring their output to financial oligarchy.
This usury money is under no velocity pressure to be spent. Banker holds onto it and buys luxury goods, or uses it to bribe politicians. They also use it in an upper loop of finance, where they buy and sell financial paper. This financial paper does not relate well to the real economy, so credit as money creates abstract financial vehicles and oligarchy, which cycle in their own loop. This upper loop of finance can be seen in money sloshing around the world looking to buy up things cheap, or going into securities, insurance, and other vehicles that do not relate to production or labor.
From 1938 to 1974, Bank of Canada (BOC) was a Crown Corporation. It spent debt free money directly into the money supply. This system appears to be credit banking, but really it was sovereign-like money. Private Banks in Canada during this period were credit-limited to four year loans at 6 percent. If you wanted to buy a house, you borrowed from a trust. These trusts were something like Savings and Loans in the U.S. The trust would loan existing money, not new credit. This meant that the new homeowner had to pay his interest to his neighbor, who was creditor. This kept the interest down in a lower loop, not vectoring to oligarchy.
Note during 38-74 Canada had no real price inflation. Their industry was world beating. People could buy their homes on one salary, and not go into debt forever. They had free college education. They had free medical. They built a national railroad, built seaways, built a 4000 mile cross continent highway.
It was after 1974 when BIS told BOC to stop spending into existence, and start “loaning” into existence, that Canada’s economy turned to shit. Now, their economy is like the rest of the West, a slavery system subordinated to private banking “credit” as money. After 74 the trusts disappeared as they could not compete against private banking 30 year loans, with zero down, etc.
www.sovereignmoney.eu
If a money supply is 97% private credit and 70% of this money supply is due to housing loans (credit) then why is it surprising that housing is bubbled and over-priced?
" overvaluation is very high in Canada."
No. Its still not the time to take out your profits.
I always had bad experiences with Canadians. They are usually very nosy and they like to copycat you. The Quebecois are the worst. Screw Canada!! Let their housing market crash, they deserve it!!
Yeah fuck those assholes.. where is Canada anyway?
Well at least Tyler and Brian Ripley are looking. I was looking as far back as 2007. The issue is not if but when this all unravels. You see Canada came to the credit party late. As in about 10 years late. So we are about on track. Politz is a fool and a politician. What the fuck else would he say. Harper is well......Harper. No one seems to be able to tell people the truth. If credit is rising with prices (and it is) then it is a bubble. Period. How the hell does a property in Toronto double and triple in 20 years with no demographics supporting it. We all heard the same shit after it burst in just about every other country that it has happened in. You know, "who could have known" ....horseshit.
What might save Canadians is the 1 trillion the Fed gave Canada as a buffer to the financial storm. So they may be able to keep the spending and wage increases going for a while. That is a lot of money for a little economy like Canada. However it will all be government created.
Why isn't the whole planet on this chart?
Fuck you Canada!
Remember when ZH use to report on scumbags like Jared Kushner? You know, before they sold the joint?
New Tyler. How about doing some more substantive reporting? Not just fluff shit that you downloaded from a news feed?!
Yup, just try getting screwed at a temp job, finding a place to stay on the fly for that temp job...then running out of money due to high gas and housing because employers have no money and they're all dickheads.
Either that or suffer a druggie landlord or be forced into buying a subprime financed shithole in a dead economy in a drugged up seedy society.
This uppity N*99er staying in a HOSTEL the other day told me that crime rates in LA went down when prices of overvalued houses went up. http://www.latimes.com/local/lanow/la-me-ln-lapd-data-20141216-story.htm...
He said he didn't care if wages supported the prices, "someone will always buy"... because of the Federal Reserve of course. You CAN buy a house with Monopoly money and pretend to be houserich.
The boomer voting and fiscal majority are THE stupidest group that has ever roamed the Earth. On my last birthday, I told my boomer immigrant exploitative parent that it wasn't worth it. She physically attacked me until I threatened to call the cops. But I was physically abused and held to high moral and ethical standards by psychotic backstabbing boomer sycophants with capital punishment and an iron fist- beaten and bruised then thrown in the closet as a baby for punishment--- before putting up with a foreign name as a US Citizen in a racist shithole --- so I can grow up and the boomer garbage rob me by use and aid of the government. THey all need to be shot. It's called "SELF DEFENSE".
People just need to be spayed. There's no hope for inferiority complex losers on drugs. Welfare, anchor babies, alimony/babymomma meal tickets- nope! people don't exist because we were wanted. I was the meal ticket to the Visa sponsor.
Boomers and the government are high.
They're the most incredible assholes and losers.
Hitler could do to them.... forget Jew bashing. The boomers are sociopathically fucking up this country because they are threatened by new money.
Watch.
What happened to original Snoopy. Disappeared after the bitcoin devolution. We lost a lot of folks after that. Folks. Lots lost.
F' you doggie style.
It ain't the boomers but the free-shit crowd who believe they deserve what other people have earned that is bankrupting this country.
The over 55 crowd has the highest % employment rate in the US.
They are working and have worked all their life only to have government give away the economy for the votes of people who demand free-shit - aka; communists
Bollocks.
I was just looking at apartment rental prices in the city of Montreal.
Seemed very reasonable compared to any American city with a metro, like New York, Boston, Chicago or San Francisco.
Harper - you voted for him and supported his support for bombing of civilians in East ukraine to try to get a market in Europe for your ridiculously uneconomic tar / shale oil and gas, and failed miserably, so enjoy the ride back down and vote more carefully next time.
Yeah just vote for those communists in the Liberal Party who will drive all business out of Canada and bankrupt the country with their welfare schemes for the free shit army while taxes become even more abusive than they are now for the working middle class.
The Chinese, Russians and Iranians are driving the market in Toronto and Vancouver. The rest of Canada RE is nowhere at the same lofty heights as these two cities. So Canada really is a tale of two cities. Montreal is down in the dumps where prices have not gone anywhere in a decade. Calgary has cooled with oil prices, so these headlines do not reflect reality. Canada is wide open for business and as long as the HAM (hot Asian money) is allowed to flow in here without any checks, rather with their cheques, these two cities will not see the bubble burst; if this is truly a bubble in these two cities. Besides banks keep lowering interest rates and money is cheap cheap cheap. So even though the debt levels are at record highs, debt servicing is easier than ever. And interest rates have nowhere to go except downwards; I believe Canada will see negative interest rates on mortgages as in Denmark, we will be paid to borrow money, and I say bring it on.
I believe the bubble will burst regionally as for example in Manitoba and Saskatchewan but don't expect much downward movement in Hongcouver and in Toronthai where Chinese is now almost the first language. A few hundred million wealthy Chinese have to leave China with their millions and Canada is their #1 destination followed by Australia.
I bought my house after the crash of 2008 for $213k, just sold it for $400k, in Canada.
That's close to $200k profit. Our debt levels are 163%, that is one of the highest in the world. Taxes are going through the roof, and everyone has brand new luxury European cars. I think I will rent for a few years, this is getting silly.
The best part, is the government is still lowering interest rates! I guess real estate prices doubling every 7 years isn't enough.
Immigration is strong here, but most of them are coming here working low paying jobs, so they'd never be able to buy that $1.5 million McMansion. If they even touch that interest rate, 80% of the country will walk from their mortgage, which will be funny because the idiots don't realize the mortgages here are 100% full recourse, meaning your debt isn't discharged unless you declare full bankruptcy, and even then they still will seize all your assets. Pretty much 80% of the country will be broke in less than a year when Yellen cranks rates this fall.
HELLO, inflation not only applys to bannanas, apples, beef, utilities expenses, (gold and silver price after toxic quadrillion paper market correction but not the way you think but 'silver for rice program' and nothing more since world is centrally planned now and forever more amen) so why wouldn't the 5% to 10% year over year rate of inflation apply to hard assets such as real estate?it sure as sh@t does. so no real bubble here when factoring in all aspects of this matrix....
1. Canada (psychological level) safest place to be during past global strife despite internment camps, relative to euro-bombing runs and running with your family across fields dodging bombs, fair assumption: Canada is safer. In turn people with cash will want to come here as they are and will create more demand for housing, simply on the safety factor alone,
2. Canada is made up of well engineered compliant common wealth nation well into stage 5 human capital/resource management programing initiative, (pyramidic matrixatomy) is already largely 'normalised' and requires very little management for now and this adds to the overall value of real estate, the USA thats another story, much social engineering catching up to do and as a result Canadians may enjoy a little breathing time while USA is brought up to speed and alignment with ideal frame of refrence that reflects the rest of the worlds human capital management systems.
3. Canada destroying currency purchasing power by 5 to 10% a year, ensures the price of 'stuff' will go up, hence the price increase due to inflation, irregardless of low interest rates and supply shortage reasoning for higher prices, do you really expect the price of real estate to stagnate while other tangible hard assets and consumer goods go up in price? not likely, unless confiscation through overt and covert taxation policys continue with the aim to remove all private property and create a work for rice western human capital to return the favor to the Chinese for their 'work for rice program.
4. Canada is resource rich so in the event that Canadian oligarchs through some cosmic event take back their printing press and control of natural resources and profit share with its human capital , well then plenty of nice things to go around,,,,unicorn thinking? yup but for application purposes it could function for a while... besides one of the mortal gods of earth said ' Canada's currency is backed by its natural resources "Evelyne De Rothchild", interesting since the mortal gods own all the worlds monetary systems, what was that about?...lol...lets move on
5. Canada by its geo-physical compostion offers expansive wilderness area unmatched anywhere in the world except Russia in which people can seek sanctuary...run and hide SHTF last option apocalypic insurance policy senario enabled by millions upon millions of wilderness acreage.
In conclusion, there simply is no bubble forming in free hold housing except perhaps in the condo market, sorry no drama or doomage candy here folks, free hold in prime locations within and just outside city limits in Toronto and Vancouver will continue to go up up and up some more
Canada is also very vulnerable to global energy prices.
Canada is dependent upon tar sands income
as prices decline, canada will be screwed
Can we get one of those for Sydney. I think a few here would probably fall of their chairs.