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These 17 Countries May Have Housing Bubbles

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http://www.washingtonpost.com/blogs/wonkblog/wp/2013/12/02/these-18-countries-may-have-housing-bubbles-if-they-pop-god-help-us-all/

Nouriel Roubini was one of the most presciently pessimistic analysts of the global economy in the run-up to the global financial crisis. And now he thinks it's happening again.

Roubini doesn't see bubbles in the places where they were most severe in the pre-2008 period. He doesn't mention the United States or Spain or Ireland. Rather, Roubini sees housing prices getting out of whack in quite a few small and mid-sized nations that are well-governed and managed to avoid the worst economic effects of the financial crisis: Switzerland, Sweden, Norway, Finland, France, Germany, (told ya!) Canada, Australia, New Zealand and the London metropolitan area in the U.K. He adds some key emerging markets that show the same dynamic: Hong Kong, Singapore, China and Israel, and major urban centers in Turkey, Indonesia, India and Brazil.

In this view of the world, a better question might be where in the world is there NOT a housing bubble (the answers, apparently, are the United States, southern Europe, Russia and all of Africa).

The lesson that global policymakers learned from the last crisis is that regulators must lean against housing bubbles, using the tools they have to ensure that a correction doesn't cripple their financial system and the broader economy. They are deploying "macroprudential" tools to try to prevent possible bubbles from getting out of control: requiring banks to insist on higher down payments, for example, and insisting that the banks hold more capital against their mortgage loan portfolios.

But the fact that prices keep rising in these markets, even amid regulators' efforts to contain them, should give some pause. Roubini writes: "Many banking systems have bigger capital buffers than in the past, enabling them to absorb losses from a correction in home prices; and, in most countries, households’ equity in their homes is greater than it was in the U.S. subprime mortgage bubble. But the higher home prices rise, the further they will fall – and the greater the collateral economic and financial damage will be – when the bubble deflates."

So should this fact: One of the countries with the most severe housing bubble in the past cycle, Spain, actually was a pioneer in some of these macroprudential tools. The Bank of Spain put in place countercyclical capital requirements before countercyclical capital requirements were cool. But it clearly wasn't enough to stop the bidding up of Spanish real estate, and the country remains in a depression today as a result.

What we're seeing right now in the countries with possible housing bubbles is a test of the theory that has been popular at the Federal Reserve and other global central banks over the past few years: that proper use of regulation can keep easy money policies from creating dangerous bubbles.

Perhaps scariest of all, if Roubini is right, is that if these are bubbles that eventually pop, policymakers will not have the tools they had in 2008 to cushion the blow. The world's central banks, in particular, don't have much (arguably any) room to lower interest rates further. Which means that if these regulatory tools aren't up to the job, when the next global financial crisis comes, we can all take a lesson from the creators of "South Park." It will be time to

.

Or just blame Carney as a proxy for Canada and architect in chief of their f*ck up.

I feel confident Andy Haldane has it all under control. He's dead clever he is. No really, he is.

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The lesson that global policymakers learned from the last crisis is that regulators must lean against housing bubbles, using the tools they have to ensure that a correction doesn't cripple their financial system and the broader economy.

Really???

The impression I got is that TPTB will encourage bubbles, at ANY quite literal cost.

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Snap.

What we are witnessing in many countries looks like a slow-motion replay of the last housing-market train wreck. And, like last time, the bigger the bubbles become, the nastier the collision with reality will be.

Prefer the other summary.

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I see no sign of a bubble in France although I guess in Paris and possibly other large cities ,like London the market is different than elsewhere. Certainly in rural areas where Brits bought prices are down about 30% from pre crash levels and unlike the` UK, properties here are either owned outright or mortgaged on low earnings multiples. Also a bubble needs to be put into context as in comparing what the price paid for an average UK slavebox would buy in any other country. It is one thing to pay over the odds for a tulip bulb, quite another thing to pay the same price for a field of tulip bulbs even if you have paid too much.

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I see no sign of a bubble in France although I guess in Paris and possibly other large cities ,like London the market is different than elsewhere. Certainly in rural areas where Brits bought prices are down about 30% from pre crash levels and unlike the` UK, properties here are either owned outright or mortgaged on low earnings multiples. Also a bubble needs to be put into context as in comparing what the price paid for an average UK slavebox would buy in any other country. It is one thing to pay over the odds for a tulip bulb, quite another thing to pay the same price for a field of tulip bulbs even if you have paid too much.

Yes, and what does it matter if there is a bubble in a place or a bubble in anything for that matter for something you don't want to buy, or have no intention of ever buying in the future......let someone else pay that price, a price they will have to live with, because it was a price they were prepared to pay. ;)

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Money's got to go somewhere, innit.

Quite so. Problem is too much savings.

It's actually interesting to note that most of those countries (not all) in his list are surplus countries and/or resource exporters.

So the '03-'07 housing bubbles were due in large part to these recycled supluses, but as those bubbles burst devasting demand those countries (US, Spain, Greece, Portugal etc etc) have been unable to act as the recycling mechanism.

Hence those surplus countries are forced into recycling their own surpluses which has ended up in domestic housing investment. It was bound to happen that way and must continue until they either reduce their savings/increase consumption or in some other way reduce their export of surplus supply and increase demand. Germany being an excellent example of this within the EZ. Unable to export their excess savings into the PIIGS it is finding its way into domestic housing. The solution of course is to reduce their surpluses which they refuse to do for dogmatic reasons.

London is somewhat of a 'special case' I think due to its continued prominence as a global financial recycling centre/tax haven/money launderer for these surplus countries. Hence why London is behaving quite differently to most of the rest of the UK.

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Not if there's no demand for it.

US isn't on the 'list'. Their bubble burst completely.

Problem isn't US savings it's the surplus countries savings.

Germany may be starting to understand this despite their public rhetoric since they're implementing a higher minimum wage next year. So they understand at least that they need to raise wages even if they won't yet admit they need to increase domestic inflation. It'll happen anyway.

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US isn't on the 'list'. Their bubble burst completely.

Problem isn't US savings it's the surplus countries savings.

Germany may be starting to understand this despite their public rhetoric since they're implementing a higher minimum wage next year. So they understand at least that they need to raise wages even if they won't yet admit they need to increase domestic inflation. It'll happen anyway.

Leverage in the shadow banking system caused the crisis not German or Chinese savers. Central banks compounded the crisis through regulatory failure and demonstrably false macro-economic models (they failed to raise rates because consumer price inflation remained low).

The US may not be on the list but they've seen plenty of HPI this year:

redfin-price.jpg

As for financial assets? An all-time, record high!

Shiller's talking about a bubble again even if Roubini isn't.

http://blogs.marketwatch.com/thetell/2013/12/02/robert-shiller-most-worried-about-bubble-in-u-s-stock-market/

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Problem isn't US savings it's the surplus countries savings.

Germany may be starting to understand this despite their public rhetoric since they're implementing a higher minimum wage next year. So they understand at least that they need to raise wages even if they won't yet admit they need to increase domestic inflation. It'll happen anyway.

No, everyone as an individual and every country should ATTEMPT to have savings (wealth).

Some will succeed and be resilient to shocks (may even benefit due to others' fragilities forcing them to sell at a low price at a bad time).

Failing countries and individuals(i) will not have net wealth and will be extremely fragile to health(i), environmental, economic, demographic, war or other problems.

Debt is the problem.

If you take out debt, it needs to be for a good reason - increase employability, competitive advantage.

The purpose of the debt must pay for itself and the debt must be repayed - preferably rapidly. It cannot go on consumption.

Mostly, taking out debt is a mug's game - and for a country to do it for no competitive advantage is a disaster waiting to happen.

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Possible reason for bubbles is media?

http://www.fool.com/investing/general/2013/11/21/how-the-media-blows-bubbles.aspx

"The first real newspapers appeared around the 1600s in Holland, Yale economist and recent Nobel Prize winner Robert Shiller mentioned at a conference in Orlando last week. That was also around the time the Dutch tulip bubble formed. "I can't find much evidence of financial bubbles before then," Shiller said."

"Same for housing. From 1890 through roughly 1990, inflation-adjusted home prices nationwide were flat, if not declining. Searching through more than 100 years of newspaper archives, Shiller found almost no mention of home prices, except in construction trade journals. "It just wasn't on people's minds," he told me a few years ago. "No one cared. One expected to buy a home as part of normal living and didn't think to worry about what would happen to the price of homes." That all changed in the early 2000s, with a burst of media coverage on rising home prices."

The Express may have doomed the civilised world, and quite a bit of the uncivilised as well.

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Possible reason for bubbles is media?

http://www.fool.com/...ws-bubbles.aspx

"The first real newspapers appeared around the 1600s in Holland, Yale economist and recent Nobel Prize winner Robert Shiller mentioned at a conference in Orlando last week. That was also around the time the Dutch tulip bubble formed. "I can't find much evidence of financial bubbles before then," Shiller said."

"Same for housing. From 1890 through roughly 1990, inflation-adjusted home prices nationwide were flat, if not declining. Searching through more than 100 years of newspaper archives, Shiller found almost no mention of home prices, except in construction trade journals. "It just wasn't on people's minds," he told me a few years ago. "No one cared. One expected to buy a home as part of normal living and didn't think to worry about what would happen to the price of homes." That all changed in the early 2000s, with a burst of media coverage on rising home prices."

The Express may have doomed the civilised world, and quite a bit of the uncivilised as well.

Haha! Not sure I entirely believe it, but it's a lovely idea.

Newspapers have always promoted the interests of their proprietors and these inreasingly have become indistinguishable from the interests of the financial community and the City generally. But surely it's the financialisation of the economy since 1980 that's been the real driver of change, in the UK especially. Prior to the Big Bang financial speculation was conducted by a modest coterie of insiders and exclusively for the rich. The Big Bang threw open the casino doors and effectively democratised financial speculation for everyman. Everyman and his wife hit the tables like honeymooners in Vegas.

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One of the amusing ironies about the coming housing bust in countries like Australia and Canada is the arrogance of the bankers and politicians there. When south Europe and the USA were blowing up - we were confidently assured that regulations and conservative practices in these countries would mean that a bust could never happen. I think quite a few people are in for a rude awakening.

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No, everyone as an individual and every country should ATTEMPT to have savings (wealth).

Some will succeed and be resilient to shocks (may even benefit due to others' fragilities forcing them to sell at a low price at a bad time).

Failing countries and individuals(i) will not have net wealth and will be extremely fragile to health(i), environmental, economic, demographic, war or other problems.

Debt is the problem.

If you take out debt, it needs to be for a good reason - increase employability, competitive advantage.

The purpose of the debt must pay for itself and the debt must be repayed - preferably rapidly. It cannot go on consumption.

Mostly, taking out debt is a mug's game - and for a country to do it for no competitive advantage is a disaster waiting to happen.

From a simply accounting entity perspective that doesn't make any sense.

One man's (country) savings is another man's (country) debt. It's that simple.

People get far too hung up on the word 'debt'. It's simply the flip side of the word 'savings'. Unless you're German, in which case you deny reality and blame everyone else.

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Leverage in the shadow banking system caused the crisis not German or Chinese savers. Central banks compounded the crisis through regulatory failure and demonstrably false macro-economic models (they failed to raise rates because consumer price inflation remained low).

The US may not be on the list but they've seen plenty of HPI this year:

As for financial assets? An all-time, record high!

Shiller's talking about a bubble again even if Roubini isn't.

http://blogs.marketw...s-stock-market/

Your chart has a nonsensical axis.

It starts after the crash not before.

Nominal prices are irrelevant. Just because something has risen since Jan '10 doesn't make it a bubble. The word bubble is being bandied around like confetti by braindead morons in media at the moment and they're almost always 100% wrong.

I have no idea why you would post that unless you have some weird agenda.

Shiller isn't talking about a housing 'bubble' in the US. If he is it's nonsense. He's pointed out an overvalued stock market which is completely different.

There's no merit in posting nonsense.

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From a simply accounting entity perspective that doesn't make any sense.

One man's (country) savings is another man's (country) debt. It's that simple.

People get far too hung up on the word 'debt'. It's simply the flip side of the word 'savings'. Unless you're German, in which case you deny reality and blame everyone else.

No, everyone as an individual and every country should ATTEMPT to have savings (wealth).

I didn't say they would achieve savings, some will fail and live with the consequences of being in debt.

Instead of being able to use your whole wage, some of it will go to paying interest on your debts. Your standard of living will be worse.

But if you have true wealth, you can use it in times of need (illness, old-age, problems etc).

This brings us to a time aspect.

Broke when young, some savings when established, use up savings in old age, possibly pass them on to next generation.

Living in debt through your whole life is dumb, and makes you fragile to LOTS of different problems.

For a country, having gold, oil, food, essentials reserves is sensible.

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http://www.washingtonpost.com/blogs/wonkblog/wp/2013/12/02/these-18-countries-may-have-housing-bubbles-if-they-pop-god-help-us-all/

Or just blame Carney as a proxy for Canada and architect in chief of their f*ck up.

I feel confident Andy Haldane has it all under control. He's dead clever he is. No really, he is.

Cant be any worse than Western OZ. GF was telling me yesterday that a colleague (Admin role) had just purchased a 4 bed in North Lake (South Perth) for $700K with her tradie boyfriend with a Mortgage 6x their combined gross salary.

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