More Real Estate Bubble Talk

Hi Folks,

   Hope you had a nice weekend, and I'm honored to have you back with me!

   Last week, we took a look at Canada and where it stands in terms of a Housing Bubble (Canadian Housing Bubble Or An Exception To The Rule) vs. our busted bubble. Today, let's expand our reach and look at a few countries around the globe to examine whether their Housing Bubble has burst yet.

   Any conversation about Real Estate and Housing would not be complete without discussing China. In a recent Investopedia story that was aptly named, "China's Real Estate Bubble", Arthur Pinkasovitch looked at the average home prices in 2007, which, "slipped from $221,900 to $219,000" and then had a "massive 21% drop over the next two years." In contract, the author said that Chinese real estate "maintained its value through the Great Recession as property values tripled between 2004 and 2009." However, he says that "major cracks are beginning to surface within the Chinese real estate market as speculation about the collapse of the bubble has started to emerge.", and points to a drop from "stable" to "negative" by Standard & Poor's ("in anticipation of a "sharp correction" for real estate prices. Analysts are forecasting that home prices will fall by 10% within the next year.")

   Pinkasovitch points to oversupply of residential and commercial real estate in the country, and says that in order to maintain GDP growth, "the Chinese government has continued to over invest in large infrastructure projects focused on real estate development. At an average wage of $7,400 people are neither able to purchase the basic $100,000 apartments units nor invest into small businesses around the new developments.", and names some cities with residential apartment occupancy rates of only 30%. On the Commercial Real Estate end, he discusses the "Great Mall of China" which, "contains 9.6 million square feet of floor space", but, "less than a dozen active shops remain in the mall".

   Additionally, the Author points to the following fact; "According to The Atlantic, residential housing investments contributes to 6% of GDP, the same level as U.S. real estate at the peak of the housing bubble". He also says that the current prices are too high, and that "property prices in major metropolitan areas have risen to unsustainable levels".

   Robert Rubin, Editor of Safe Money Products, corroborates this, and says that China is already full of "empty cities, malls, and airports. That’s why China may not be the place for long-term safe money, despite its boom.". Rubin says that Local governments around China formed “Local Government Funding Vehicles” (to lend money to developers), but says that the finances of these "unofficial banks" are off-record, and says that the government of China "recently estimated 26% of these loans are bad, and 50% will be repaid only with difficulty.". Rubin also says that the real estate bubble "may pop when its government raises interest rates to control inflation."

   Putting the China "Bubble" on hold for a moment, let's take a look at a few other countries.

   In the Middle East, and specifically in Saudi Arabia, "A leading Saudi architect has warned that the Kingdom’s ambitious housing programmes could be scuppered by a looming real-estate bubble", says an article in Construction Week, titled, "Kingdom faces real-estate bubble, says Saudi Diyar". "The real-estate sector is ridiculously overpriced; it is a bubble", says Saudi Diyar principal Hisham Malaika on an Arab News interview. Additionally, says the Diyar from the oil rich nation that seems to build endlessly, "The cost of real estate is over inflated, and it is prohibitive for real-estate developers to finance projects for low- and medium-income families".

   In Europe, the Bulgarian Real Estate Market will return to an uptrend imminently, says an article titled, "Limited Return' of Bulgarian Real Estate Market 'On the Way'" and the "Bulgaria Real Estate Report Q3 2011" of Business Monitor International (BMI). The report cites data that an "average of 1 550 property auctions took place a month in January and February 2011, compared with a monthly average of 750 in 2010."

   The story sums up the Bulgarian market and says that the market "has a long way to go to recover before BMI sees anything like the growth of the previous decade", and that "a fundamental improvement in Bulgaria's economy has yet to be seen that would prompt BMI to upgrade the report forecasts and therefore the 2011 real GDP growth expectation is left virtually unchanged".

   Although the countries discussed here appear to be at differing stages of Bubbles and recoveries, we live in a Global Economy, which is not a cliché. As Rubin points out regarding the Chinese market; "The great threat isn’t to China, but to the commodity producers around the world that feed Chinese construction. China is the largest commodity consumer in the world. If Chinese construction wanes, demand for commodities will plunge. Commodities, stocks of commodity producers, and currencies of commodity producing nations will all be hit hard." The ripple effects of each country ultimately effects all of us, either directly or indirectly.

   What are your thoughts on this story?


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HomeRun Homes Blog: http://blogging.lease2buy.com
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TAGS: #Canada #ChinaRealEstate #HousingBubble #realestateprices #commercialrealestate #MiddleEast #SaudiArabia #Europe #Bulgaria #GDP

Canadian Housing Bubble Or An Exception To The Rule

Hi Folks,

   Happy Wednesday and glad to have you back.

   We live in a Global Economy that literally synchronizes over time, and the Economy of each country has an effect on the others. As a subset of the Economy of any given country, there exists the Housing/Real Estate Market. Today, I'd like to take a look at Canada, our Neighbors to the North. In future editions, we will look at other Countries as well.

   "Looking at Canada in general, I don't see any bubbles", says Colette Gerber, a Division Director for the Real Estate Board of Greater Vancouver. "With respect to Vancouver", says Gerber, "real estate in this city is a hugely hot commodity." She admits that many people believe Vancouver "is a bubble waiting to pop", but she disagrees because, "Vancouver is geographically constrained with mountains and water preventing the city from being able to spread out. Vancouver continually ranks as one of the most desirable and most livable cities in the world. With a finite amount of land available and such a high demand to live in Vancouver, prices in this city will always rise."

   In Ontario (includes the Capital of Ottawa and the largest city of Toronto), Gerber says that, "housing will always be in demand because the majority of corporate offices are headquartered in that province."

   In terms of the province of Alberta, which encompasses the major cities of Calgary and Edmonton, Gerber says the major cities in Alberta "have seen an increase in activity as more jobs are made available in the province's main industry, the oil fields.", however, she points out that this "isn't a bubble", but it is "normal economic activity."

   In a recent article in the Calgary Herald, titled, "Calgary housing prices expected to rise", by Mario Toneguzzi, he author cites a housing price survey (The Royal LePage House Price Survey and Market Survey Forecast) that says "Calgary's residential real estate market has experienced a "modest" year-over-year decline but prices are expected to rise in the second half of the year, and adds from this report that, "detached bungalows have witnessed the largest year-over-year price decreases in the resale market", followed by standard two storey homes, and then standard condominiums.

   In a quote from the story in the Calgary Herald, Ted Zaharko, broker and owner of Royal LePage Foothills, stated that "Real estate activity in the Calgary market is down slightly year-over-year (and) at the moment there is not a sense of urgency to purchase", but, "With low interest rates, a strong economy and a healthy energy sector, Calgary's real estate market should start to pick up in the latter half of the year". Further, as Toneguzzi write, "According to Royal LePage, the average year-over-year house price in Calgary is forecast to climb 3.8 per cent in 2011, while sales are expected to decrease two per cent." The President of CREB, Sano Stante, said in the same article that, "Improved job prospects, combined with an increase in the number of people moving to Calgary, will give lift to our housing market for the remainder of this year and into the next."

   So, what can we summarize about the Canadian Housing "Bubble" (or lack thereof)?

   "Definitely no bubble for Canada as a whole, just regular economic cycles of supply and demand", says Gerber. Additionally, per Kelvin Mangaroo, President of RateSupermarket.ca; "The Canadian Housing Market did not take as much of a hit as the US did", and adds that, "house prices in Canada are now back up to pre-recession levels after only two years.".

   Mangaroo cautions that with Canadians taking on more debt and interest rates still at record low levels, "when rates do increase (which they ultimately will) many homeowners will feel the pinch and the Canadian Housing Market is bound to dip."

   Are you a Canadian Homeowner, Canadian Real Estate Investor, Agent, or a Canadian Real Estate professional? We'd love to hear your thoughts on the topic.

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Rob Eisenstein
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HomeRun Homes Websites: http://www.lease2buy.com and http://www.homerunhomes.com

TAGS: #CanadaRealEstate #HousingBubble #Vancouver #Ontario #Toronto #Alberta #Calgary #Edmonton