Best of the Week
Most Popular
1.UK House Prices Momentum Crash Threatens Mini Bear Market 2017 - Nadeem_Walayat
2.Perfect Storm - This Fourth Turning has Over a Decade of Continuous Storms to Come - James_Quinn
3.UK House Prices Momentum Crash Warns of 2017 Bear Market - Video - Nadeem_Walayat
4.Billionaire Investors Backing A Marijuana Boom In 2017 - OilPrice_Com
5.Emerging Markets & Basic Materials Stocks Breaking Out Together - Rambus_Chartology
6.Global Currency Reserve At Risk - Jim_Willie_CB
7.Gold and Silver: Your Stomach Is Probably Wrenching Right Now - The_Gold_Report
8.Warning: The Fed Is Preparing to Crash the Financial System Again - Graham_Summers
9.Basic Materials and Commodities Analysis and Trend Forecasts - Rambus_Chartology
10.Discover Why A Major American Revolution Is Brewing - Harry_Dent
Last 7 days
Bitcoin Hits New All-Time High Over $4,400 As It Catches Paypal In Total Market Cap - 17th Aug 17
3 Psychological Ingredients behind Great Web Content - 17th Aug 17
The War on Cash - Rogoff, Orwell and Kafka - 17th Aug 17
The Stock Market Guns of August, Trade Set-Up & Removing your Rose Tinted Glasses - 16th Aug 17
Stocks, Bonds, Interest Rates, and Serbia, Camp Kotok 2017 - 16th Aug 17
U.S. Stock Market: Sunrise ... Sunset - 16th Aug 17
The Next Tech Crash Could Delay Your Retirement by a Decade - 15th Aug 17
Gold and Silver Precious Metals Nearing Breakout - 15th Aug 17
North Korea Showdown: Pivotal Market Turning Point - 15th Aug 17
Tech Stocks DOT COM Bubble Do-Over? - 14th Aug 17
Deep State Conspiracy or Chaos - 14th Aug 17
From the Trans-Atlantic Axis and the Trans-Asian Axis - 14th Aug 17
Stock Market Intermediate Correction Underway - 14th Aug 17
The Islamic State Jihadi Pivot to Asia - 13th Aug 17
Potential Pivots Upcoming for Stocks and Gold - 13th Aug 17
North Korean Chinese Proxy vs US Military Empire Trending Towards Nuclear War! - 12th Aug 17
Gold Stocks Coiled Spring - 12th Aug 17
Neil Howe: The Amazon-Walmart Rivalry Will Determine the Future of Retail - 12th Aug 17
How to Alton Towers Half Price Discount Entry 2017 and 2018, Any Time, No Pre-Booking! - 12th Aug 17
Top 3 Technical Trading Tools Part 2: Relative Strength Index (RSI) - 11th Aug 17
What Makes Women Better Investors - 11th Aug 17
Crude Oil Price Precious Metals Link in August - 11th Aug 17
Influencer Marketing Predictions All Businesses Should Take Into Account - 11th Aug 17
Really Bad Ideas - Government Debt Isn’t Actually Debt - 10th Aug 17
Gold Sees Safe Haven Gains On Trump “Fire and Fury” Threat - 9th Aug 17
Why Is The Stock Market Not Trading On Fundamentals Lately? - 9th Aug 17
USD/CAD - Can We Trust This Breakout? - 9th Aug 17
New Monthly Rebate to Help Reduce Your Trading Costs - 9th Aug 17
Stock Market Divergences Are Now Appearing! - 9th Aug 17
Is Inflation an issue or did the Fed Mess Up? - 8th Aug 17
Top 3 Technical Trading Tools Part 1: Japanese Candlesticks - 8th Aug 17
Researchers Find $10 Billion Hidden Treasure In A Dead Volcano - 8th Aug 17
What Happened to Thousands of Sheffield's Street Trees 2017 - Fellings Documentary - 8th Aug 17
Solar, Bubble, Banks, War, and Legal Tender: Five Reasons Why You Should Buy Silver Now - 7th Aug 17
CRASH - If Some People Do It, Nothing Bad Happens, But If Everyone Does It, All Hell Breaks Loose - 7th Aug 17
Gold and Silver : The Battle for Control - 7th Aug 17
Precious Metals Sector is on Major Buy Signal - 7th Aug 17
Stock Market - Has Time Run Out? - 7th Aug 17
Get Ready for an Historic Upside Gold and Silver Run - 7th Aug 17
BOOM! Bitcoin Rockets To New All-Time High As Cryptocurrencies Surge Higher! - 7th Aug 17
U.S. Dollar: This Crash Signals the End - 6th Aug 17
Predicting The Price Of Gold Is A Fool’s Game - 6th Aug 17
Asda Sales Collapse and Profits Crash! UK Retailer Sector Crisis 2017 - 6th Aug 17

Market Oracle FREE Newsletter

3 Videos + 8 Charts = Opportunities You Need to See - Free

Canada Real Estate Bubble

Housing-Market / Canada Jun 30, 2017 - 06:39 AM GMT

By: Harry_Dent

Housing-Market I’ve been seeing a lot in the news lately about Canadian and Australian real estate prices. Here’s just a sampling:

New Brunswick real estate offers a lesson on peak housing prices

Condo flipping on the rise as Vancouver market heats up

Face it Canada – you’re a real estate addict and no one wants a cure


Canada real estate industry welcomes Buffett to the neighborhood

Canada’s red hot real estate heats up apartment market to heights not seen in 30 years

Canada is on the ‘A-list’ for commercial real estate investors, in a world of uncertainty

Most of what we’re hearing is that there’s little to worry about with our neighbor’s real estate prices shooting to the moon.

Well, as I told 5 Day Forecast readers yesterday, there IS something to worry about. Something BIG.

Today, I’ll share with you what I told Boom & Bust subscribers yesterday…

Between early 2006 and late 2012, real estate in the U.S. took a whipping worse than what the Great Depression dished out. It lost 34% compared to the 26% it shed back in the early 1930s.

But property prices in Canada and Australia hardly paused, and then they continued their march higher.

Canadian home prices are now 84% higher than in the U.S.!

Despite Canadian’s slightly lower incomes!!

And the Aussies’ are even higher. Home prices in Australia are now 107% higher than those in the U.S.!

It’s terrifying. Stephen King should turn it into one of his horror stories. It’d be a best-seller.

Look at this chart…

You can see how the trends in prices correlated closely for three decades, since 1975. But from early 2006 forward, the U.S. diverged, trending downward while all other English-speaking countries – including New Zealand, Great Britain, Singapore, and Hong Kong – seemed to dust themselves off and continue on.

Turns out, that was a blessing in disguise for U.S. property owners. It means that in the next larger and more global real estate crash, we’ll suffer less than our counterparts.

Both Canada and Australia’s real estate prices went exponential again after 2012. And to me, that suggests we’re in the final “orgasm” phase of these bubbles.

During my last speaking tour of Australia in late May, mainstream economists were finally admitting their country had a bubble. Now I’m seeing more and more articles about a bubble in Canada, with surging consumer debt.

It’s fuel on the bonfires!

Tread carefully here, readers. There’s trouble ahead…

What My Bubble Model Warns

Since 1975, the gains in Australian real estate values have been 25.5 times, while in Canada they’ve been 11.9 times, and 5.5 times in the U.S.

But the most important point, for me, is early 2000. That’s what I’ve identified as the real estate bubble origin. Gains since then have been 248%, 211%, and 69%, respectively.

My real estate bubble model calls for a fall 85% of the way back to that bubble origin, on average. That would imply a downside risk of 61% in Australia, 50% in Canada, and 35% in the U.S.

However, because of Australia’s stronger demographic trends, I don’t think its real estate market will suffer such an extreme loss. I suspect it’ll lose closer to 50%, but that’s still a kick to the gonads.

The worst-case scenario would see Australian real estate shed as much as 71%, while Canadian property lost 68%, and U.S. prices declined 41%.

All bubbles ultimately succumb to their own extremes. U.S. real estate burst earlier because of our subprime crisis, a problem not experienced in Canada and Australia. But, as home prices head into the stratosphere, fewer people can afford them, and eventually it all comes crashing down.

The median price-to-income ratios are highest in Australia, at 7.0. In Canada they’re 4.7. In the U.S., they’re 3.9 (which is modest, but still high). This means Australians must fork over seven times their income to buy a house!

As an aside, median price-to-income ratios are 18.0 in Hong Kong, 13.0 in China, 10.0 in New Zealand, and 4.2 in the U.K. (although London is higher).

So, the rubber hits the road when it comes to consumer debt burdens, which are heavily weighted with mortgages.

That’s what will put a limit on this bubble, and it’ll happen sooner rather than later. Just look at debt ratios in these three countries..

Since 1995, just before the stock and real estate bubbles, consumer debt to disposable income ratios (after tax) have risen a crushing 215% in Australia (3.15 times), 176% in Canada, and, after our first crash, 107% in the U.S.

It’s time for a debt deleveraging!

And that goes for businesses and their commercial real estate even more because it almost always gets hit harder than residential property.

It may well be that the Canada bubble bursting triggers ours this time around. But Australia is the wild card due to the intensive foreign Chinese buying there.

Don’t believe these bubbles won’t burst. Instead, be prepared.

For the last few weeks, we’ve highlighted the prevalence of fake financial news. I include in this the stories we’re hearing about Canadian and Australian real estate.

To our subscribers who live in those countries… tread carefully. When property prices roll over, the asset becomes illiquid amazingly fast.

And to all our subscribers, watch out for my email on Friday, when I’ll continue this fight against fake financial news.

Harry

http://economyandmarkets.com

Follow me on Twitter @HarryDentjr

Harry studied economics in college in the ’70s, but found it vague and inconclusive. He became so disillusioned by the state of the profession that he turned his back on it. Instead, he threw himself into the burgeoning New Science of Finance, which married economic research and market research and encompassed identifying and studying demographic trends, business cycles, consumers’ purchasing power and many, many other trends that empowered him to forecast economic and market changes.

Copyright © 2017 Harry Dent- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Harry Dent Archive

© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife