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by velodrome 3604 days ago
The Canadian housing market is currently in a bubble. The same can be said about the Australian housing market.

Canada

http://i.huffpost.com/gen/1100960/thumbs/o-BMO-HOUSE-PRICES-...

http://static5.businessinsider.com/image/54aea0136da8118f2ae...

Australia

https://1.bp.blogspot.com/-NuIUphAP17w/Vth6P3w2FzI/AAAAAAAAC...

http://www.propertyobserver.com.au/images/stories/keenjan2.p...

3 comments

A bubble is a more complex phenomenon than large price increases. A bubble is inflated by speculation that isn't rooted in anything except the rising price.

If rich foreigners are buying property to summer in because they like the weather, then not a bubble. If rich foreigners are buying property because the property has gained X% in price every year for the last ten years but they don't know anything about the specifics of the local real estate market, then more likely a bubble.

You also can't say something is a bubble until after it pops.

It looks like foreign buyers are also speculating. The difference is that it seems that foreign buyers are interest in long-term holding (instead of quick flips) and they are paying in cash.

So there's no risk of them being forced to sell at the bottom, like what happened to Americans, because there will be no 5/1 ARM that needs to be refinanced. Since these buyers paid in cash, so most of them will be able to weather a storm.

A bubble is inflated by speculation that isn't rooted in anything except the rising price.

It's been like that for the last 8+ years.

You are trivializing how difficult it is to determine this. For example, is the empty mansion empty because someone is speculating with it or because a globe trotting billionaire forgot he bought it?

I'm sure there is speculation going on in the market, but we can't tell to what degree without polling the people buying real estate.

Hence the reason for the second rule. You don't know what they're propped up on until they disappear.
(I posted this in a previous article.)

You really should include a link to this as well- Real Estate Board of Greater Vancouver MLS Home Price Index http://www.rebgv.org/home-price-index?region=all&type=all&da...

This shows the the price trend of Detached, Townhouse, and Apartment up to the last 11 years, broken by individual cities in Greater Vancouver.

But it is misleading. If you look at Metro Vancouver's trend, all 3 types of housing have gone up in prices. But if you look at the surrounding cities, only the Detached and Townhouse prices have gone up. Apartment pricing have remain relatively flat until 15 months ago. Since then Apartment price have gone up as well.

This is probably because 15 months ago, the Detached/Apartment pricing have increased to the point where buyers started to consider Apartment as a viable resident.

PS. If you look at the graph, you will notice that the prices have gone up so much it broke the graphing software.

What position have you taken to profit from this bubble, and how has that position performed since inception?

There should be a rule on HN that whenever someone calls a bubble, they must also share an estimate on how long the bubble has been building, when it will burst, and how to profit from said bubble. They should also have to disclose whether or not they have any skin in the market of the supposed bubble asset.