www.Roubini.com
"Possible near-term turbulence but Canadian market to remain on track The most likely scenario, in our view, is a mostly flat trend in housing demand in Canada overall in the next two years (and potentially beyond). The risk of a significant, sustained and widespread drop will be limited given our expectation of a positive economic context that will sustain growth in household income and of a gradual pace of interest rate policy normalization – the Vancouver market could be an exception"
The lack of affordability of housing would have far reaching affects in BC where more than 70% of disposable income consumed in mortgage liability. The creative , young class is fleeing the province as they could not afford house with their meagre salaries, which also lead to migration of businesses to other provinces. The US style crash is not viable because of strong immigration along with investors from China racking up properties and pay astonishingly high price.
Strong Canadian $ also has disastrous affect on Canadian businesses. Everyone is driving down south and save 20-40% and use the leverage of strong Canadian $ . However , according to Robert Shiller Canada is lucky while facing economic turmoil , high prices of oil and commodities saved Canada . Was this saving or destroying ? The time will tell
Bugling versus burgeoning .....
ReplyDeleteLast 20 years are years of irrational exuberance and whole economic spectrum is like huge balloon, you control one end of the balloon ,another end bulged, for instance stock market bubble in late 80's , technology bubble in 2000, housing bubble in early 2000 and now commodity bubble , oops ! I associate the reason of bubbles even in biggest economic turmoil after 1929 to the human psychology. Since the breaking of Soviet Union and ending of cold war people freed from constantly lingering fear of 3rd world war. People are positive and fearless first time in modern history.However, overly optimistic environment is new for us but think how this protuberance of irrational exuberance cause hardship for millions of people , increase the disparity of the distribution of wealth.
The whole new economic paradigm is tough to understand and it takes time to adjust to new economic realities.There are opportunistic group of people who may be manipulating in this new paradigm and encourage bubbles.