On the pessimistic side there’s
Nouriel Roubini, the man known as “Dr. Doom” for his pessimistic outlook on the global economy. He recently pinpointed Canada’s housing market as a
bubble set to pop.
Canada
is in the company of other housing markets that Roubini (known as one
of the few to correctly predict the U.S. housing crash) says are showing
“
signs of frothiness, if not outright bubbles,” including Switzerland, Sweden, Germany, Australia and New Zealand.
More optimistic is Bank of Canada governor Stephen Poloz, who reiterated again last week that
he doesn’t see a bubble. Instead, he believes there will be a gradual slowing of sales activity in the years to come.
“The
bank continues to expect a soft landing in the housing market,” he
said, repeating calls economists have been making for the past several
months.
So far, predictions on both sides are proving to be incorrect as Canada’
housing market continues to defy expectations. That’s despite
rising borrowing rates being offered by the banks and government moves to tighten mortgage conditions to prevent a U.S.-style crash.
“2013 was a year of pleasant surprises for Canada’s housing market,”
BMO
Capital Markets senior economist Sal Guatieri said in a recent note.
“Far from extending last year’s deep sales dive on mortgage-rule
turbulence, the market pulled up sharply and is cruising at an
above-normal altitude.”
Even the major cities expected to drag down the data,
namely Toronto and Vancouver, have outperformed, BMO notes.
In
Toronto, Canada’s largest city responsible for about one-fifth of
national sales, BMO says activity is up 20 per cent year-over-year for
the months of August-to-October, as prices continue to climb.
That’s despite ongoing calls for a crash, particularly in the
condo market where overbuilding of units has been an ongoing concern.
“The
number of newly built, unoccupied condos is not high when normalized
for population growth,” Guatieri writes. “For the most part, markets are
balanced, but sellers rule and bidding wars prevail in certain pockets
where listings are scarce.”
In high-priced Vancouver, which many
believe has the greatest risk of a housing collapse, the market has
bounced back strong from a dip in sales earlier this year.
Sales
were down 33 per cent at the worst point earlier this year, but have
since “pole-vaulted” 50 per cent to “near normal levels,” says BMO.
“Buyers
held the upper hand last year, but the pendulum has swung toward
balance today,” Guatieri says, predicting housing prices to fall
slightly as mortgage rates continue to creep higher.
Overall,
Canada’s housing market is rebounding across the country with sales up
about 8 per cent in October compared to the same time last year,
according to the Canadian Real Estate Association. Preliminary data for
November also shows continued strength in sales.
Both the cautious
and the extremely pessimistic camps have yet to be proven correct in
their calls for Canada’s seemingly unpredictable housing market.
Eventually, one side will claim victory. Which one remains anyone’s guess.
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With
continued uncertainty around the globe, today a man who has been
involved in the financial markets for 50 years, and whose business
partner is billionaire Eric Sprott, warned King World News about what
will “bring down the entire financial system as we know it.” He also
discussed what this means for investors around the world. Below is what
John Embry had to say in this powerful and timely interview.
First, AIG created a nice trendline of support (blue) over the last 9
months that broke in early November. As the stock has tried to rally,
that previous trendline of support became a strong resistance. The break
of the trendline means a break in the previous trend, but it doesn't
necessarily mean a lower move for the stock.
As
most of you know I have been covering the Triple Net REIT sector for
years and as the category has evolved there has been considerable debate
as to whether the once niche sector can sustain the growth. Thanks to
the wave of M&A (merger and acquisition) activity, the Triple Net
REITs have mushroomed into dominating capital markets platforms that
thrive on external growth.