Canadian housing market next one to go bust & cause global ripples.

[bushi]

there you go - an analysis how bad the size of the Canadian housing bubble is. Funny enough, by New Zealand analyst (yes, I am following through on my research on "bug out to another countries" )). Who as well compares New Zealand private debt to Canadian, as being very high (150% of their respective GDP)

http://www.interest.co.nz/opinion/5...ubble-canada-may-cause-international-distress

From the article, it seems that the size of Canadian bubble iss relatively much worse, than US' was (one would think that people would learn ...)

Also, it seems, that the music is already fading, and will stop any moment now:

Sales fell in January and foreclosures increased tenfold.

...also, just like I told how CBs hands would be tied from fighting incoming inflation by rising interest rates:

The Bank of Canada is worried but it has kept interest rates low because American rates are low and if Canada raises them it would provoke a major rise in the Loonie (Canadian Dollar) which would murder exports and manufacturing. But some action by the Bank seems necessary to deflate the bubble and also rein in inflation which is running at 3%. Another problem is an estimate that a 2% rise in interest rates would mean that 10% of Canadians would be spending 40% of their income on debt servicing.

...not to mention surge in costs of sovereign debt servicing in case of increased rates, BTW - because Canadians are certainly not the ones that Canadian govt is worried about, but the govt purse is a different matter altogether.

It really seems to be inevitable, market manipulations and whatnots, that one just MUST kept stocking PMs, and lay low for few more years or so, to start picking up the bargains...

Also, I cannot understand how it is that an asset that has been inflated for the last 11 years (as mentioned in the article) at 7% annual rate, commenters expect "20% reduction" on it's prices as a "big reductin"... WTF? It more than DOUBLED in price in that timeframe (more likely ~120% increase), so why only 20% reduction is expected, ESPECIALLY when it creates a national/international shakeup and crisis, at the same time (as it certainly will)?

Regards,

 

[Jetstream]

It is still crazy here. Wife and I looked at a house on rural property last week. We were the first ones to view it the day it was listed. It was bought within an hour after we left by the next couple who were willing to pay more than what was originally listed for sale (additional property with it).

 

[pmbug]

So many "other shoes" waiting to drop. Just keep stacking and preparing as best you can.

 

[bushi]

It is still crazy here. Wife and I looked at a house on rural property last week.

By GOD, Jetstream, do not buy a property in Canada now, are you guys being serious??? Don't you see what is coming your way - just look south your border!

Just rent for now. I know it hurts, to think about how much money you throw away every month on rent. I feel the same. But it might help to do some maths/simulations, what happens when (inevitable) crash comes:

Here's the thing, I'll give you my example. Here in Ireland, if I went ahead and bought a house here around the time when I immigrated (around the top of the boom, which is certainly a place where Canada IS today), I'd possibly have to paid TWICE as much, comparing to today's prices. Yes, prices for some properties had been down sometimes 50%, which means I'd have to pay double the money to buy the same house just a few years ago! And from what I know, it is the asking prices - how much sellers are actually getting for houses being actually SOLD, is another matter. And this is with all the government "bailouts", bank propping, and infamous NAMA agency (National Assets Management Agency - created to buy toxic assets from banks/big developers, thus preventing the housing prices from a complete crash), ALL the mainstream media trumpeting all the time, every few months, that "housing prices have finally bottomed, houses are greatly undervalued now, NOW is a GREAT time & opportunity to buy a house, if you can afford it" - you name it - which is really an extraordinary intervention! All that doesn't help, what goes up, must go down eventually. Throw in demographics on your side of the pond - Baby Boomers starting to retire any year now, supplying their houses to the market, downsizing or otherwise moving on. Who will buy all these houses? How will it affect supply/demand in the housing market? (I am assuming that Canada faces very similar demographics to US, but I might be wrong in this particular regard. But demographics is only proverbial last nail in the coffin, much important is the housing bubble being just about to burst in Canada)

Now, how that rent, that I've spent during the last few years, compares to this HUGE price reduction, that Irish market is experiencing (and I bet you, it is not an end of the slide - markets tend to overshot down, after crashing, the more, the bigger the bubble was - and it was huge here, and it is even bigger in places like Canada, Australia, New Zealand TODAY - from my perspective, doing my homework & comparing these countries to others, busted already)? That rent spent is a small change, relatively speaking, and it is all MONEY WELL SAVED. Additionally, my rent is DECREASING every year.

I'll see how things are unveiling, before making my final move (I don't know if I'll stay here in Ireland for good), but for now - it finally is a buyer's/tenant market here, not seller's/landlord's, thanks God.

Be patient, be smart, don't get caught on the wrong side of the boom/bust cycle. Buying a property is a big commitment, only make it using solid reasoning, and not anything else. Certainly not because "it is still crazy here", it should light up all of your alarm bells & controls!

just my humble $.02, $.02, $.02 & $.02

 

[rblong2us]

ive been reading articles predicting a collapse in the Canadian and Australian property market ever since '08.
oh yeah and the UK market, which has dropped about 25% but has still not corrected to historic norms.

i do sometimes wonder why some obvious bubbles continue for so long .......

 

[DCFusor]

Just like with a PM purchase, buying with cash is the way to go. Using the object as collateral for a loan leads to all sorts of heartburn - all the stuff we know and read about. The value of my place likely dropped, but I'd never know that (just try getting your taxes reduced due to that in the US!).

Yeah, that's awful hard to pull off. It's still worth mentioning. In my rural setting I got lucky. I bought 1/2 acre of just-logged land for a few hundred, homesteaded on that (I'll get pix of the original up here someday), saved money and was able to buy "the land next to mine" later on - dollar cost averaging just like some other investments.

This probably isn't possible in that many places, especially the older countries that are all built up and more "every square inch spoken for" with more socialist regulations, but it's worth noting that it's still possible in some places. IT might actually make places like this the kind of place you'd bug out to, instead of from.

I hear in a lot of Europe, most of what I'm doing is very illegal - no unions, guilds, licenses, etc involved, this is pretty much all DIY for me. There are still pockets of freedom in this country, but you kinda have to search them out - they sure don't advertise.

 

[bushi]

Short answer for Canada & OZ: rising commodities. The bust in markets and resulting boom in commodities (especially high oil prices, helped Canada) and general uptick in natural resources prices have kept them both afloat for now.

But here's the thing, when people start to outbid each other, to take on the mortgage, to buy a condo for rent (and that's what's happening in these two countries) - the end is just around the corner. The amount of private debt to GDP ratio in Canada is staggering, it is much higher than it was in the US. The housing prices there are ridiculous (just look for yourself, don't take my word for it). You can't have it, unless people are getting deeper & deeper in debt. Which put's stress on their spending, which puts stress on the economy in general. See where it ends.

The exact timing might be an issue, as usual - but definitely, I wouldn't bet the farm on the fact, that the bubble that is long overdue for bursting, have been kept growing past it's due date!