Tuesday, January 3, 2017

Global Real Estate Bubble, 2017

"Property prices have climbed to dangerous levels in several advanced economies, raising the risk of massive price falls if markets overheat...

Real Estate markets have already overheated,
via artificially low interest rates and subprime lending,
just like last time, but this time it's about everywhere and concurrent

Catherine Mann, the OECD’s chief economist, said the think-tank was monitoring “vulnerabilities in asset markets” closely amid predictions of higher inflation and the prospect of diverging monetary policies next year.

The more living life costs, the less house one can afford

Ms Mann said a “number of countries”, including Canada and Sweden, had “very high” commercial and residential property prices that were “not consistent with a stable real estate market”.

Greensboro has added a big chunk of commercial real estate 
and a bunch of restaurants etc..., without a corresponding increase in population
and income

...the number of homes sold in the UK for more than the asking price has tumbled in the last year.

In Greensboro, about no to very low homes sold for more of asking prices

...“We expect prices to fall next year as this slowdown works through the system. Generally the first thing to change will be the number of transactions, and then after the gap between what people will pay and how much people will accept opens up quickly and takes a while to close. Sales slow, and then there is a price adjustment.”

Higher interest rates = less home buyers can afford

The EU’s financial risk watchdog recently warned that eight countries, including the UK, had property markets that risked overheating in the environment of low interest rates.

The US, Germany, the UK, Canada, Australia, Sweden, New Zealand...

The Bank of England also cautioned last month that the improvement in household finances seen since the 2008 crisis “may have come to an end”.

...The OECD’s latest economic outlook warned that an initial price correction in overvalued property markets “could be magnified by fire-sales” if investors had been “betting on continued price gains due to monetary policy support”.

Central Banks helped make it happen, just like last time, 
only this time it's world wide and much, much bigger

...the OECD was also monitoring the potential impact of a stronger US dollar on emerging market economies, particularly those with large shares of dollar denominated debt.

The higher the US dollar goes,
the more money a debtor has to put up in another currency 
to make debt payments

These countries could see the cost of servicing their loans rise sharply if their currencies depreciate against the greenback.

“The potential monetary policy divergences until 2018 are pretty big, and that does create vulnerabilities for emerging markets,” she said...