After the cataclysmic mid-2000s housing bubbles in the U.S. and European PIIGS nations, one would think that the world would never allow another housing bubble to rear its ugly head again. Unfortunately, this thinking is completely wrong. Since 2008, the world has openly embraced new housing bubbles with astounding vigor in complete defiance of all lessons taught by the Global Financial Crisis. A series of new housing bubbles have inflated in practically every country outside of deflation-prone Japan, the U.S. and PIIGS nations - I've named this bubble "The Post-2009 Global Housing Bubble" or "Housing Bubble 2.0." These new housing bubbles are located in China, Canada, Australia, emerging market countries and northern & western Europe.
Here are the world's latest housing bubbles:
China's Housing Bubble
Chart Source: GlobalPropertyGuide.com
China's housing bubble is just one aspect of the country's overall bubble economy of the past several years. While China had a housing bubble as early as 2008, it briefly deflated during the Global Financial Crisis until the country launched a massive $586 billion economic stimulus program to help bolster the economy. China's stimulus plan was successful at staving off an economic crisis- so successful that inflation, overheating and overbuilding quickly became a concern again as the newly printed stimulus money sloshed around the economy, creating very alarming distortions and speculative activity. China's blazingly fast economic growth coupled with an expanding credit bubble and fresh sloshing stimulus money created the perfect conditions for inflation, which has manifested in the form of soaring rents, food prices and wages. High inflation, negative real interest rates and limited investment options encouraged many Chinese to buy real estate to protect their savings from the ravages of inflation, helping to reflate the housing bubble that first reared its ugly head in 2008. Housing prices soared 140% higher nationwide from 2007 to 2011 with Beijing housing up 800% since 2003. Clearly having learned nothing from the disastrous U.S. housing bubble, real estate speculators or "flippers" have taken China by storm, buying "real estate as if they were buying vegetables," such as a housewife who bought 10 properties within 30 minutes and the college student who flipped an astounding 680 flats. Read more about China's Bubble Economy & Housing Bubble
Canada's Housing Bubble
Canada is experiencing a classic bubble economy that is driven by a commodities export boom (which is part of the commodities bubble) a massive housing bubble that is larger than the U.S. housing bubble was at its peak, a consumer debt bubble and global "hot-money" investment inflows. Canada's bubble economy is driving a U.S. export boom that has helped the U.S. economy recover from the Great Recession - this is just one of the many reasons why the U.S. recovery is actually a "bubblecovery." Canada's housing bubble is now nearly 40% larger than America's bubble at its 2005 peak. Price-to-rent ratios, a common real estate valuation measure, are flashing clear warning signs of a bubble as well. Even the IMF is warning of a Canadian housing bubble (but seems to understate the extent of the bubble and its risks as "official" organizations tend to do). Vancouver homes are now pricier than NYC homes, thanks partly to Chinese investors. $1,050,000 will only buy a tiny house that is merely "livable" in Vancouver, where median real-estate prices are an astounding 9.5 times median household income. Read more about Canada's bubble economy & housing bubble
Australia's Housing Bubble
Australia, similar to Canada, has a bubble economy that is driven by the export of commodities to China, a housing bubble that surpasses the U.S. housing bubble in severity, a household debt bubble and global "hot money" investment inflows. Australia's housing bubble, like its cousin Canada's bubble, has grown larger than America's housing bubble in its heyday and is driven by a huge boom in mortgage debt as bubble-blind investors, realtors and economists strongly believe that Australian property prices have reached a permanently high plateau (a very typical belief during bubbles). A researcher recently showed how bubble-denying Australian property investors believe in four key myths to convince themselves that the property market boom is "different" from the U.S. and other nations' 2000s property bubbles that ended disastrously.
The Emerging Markets Housing Bubble:
China's economic boom and now bubble has caused commodities prices to soar - along with the fortunes of natural resource-rich emerging market nations. Investors have clamored to invest in emerging markets in recent years (now including nations that are not commodities exporters) and their "hot-money" has inadvertently resulted in overheating economies and property bubbles throughout the entire emerging world. Soaring asset prices and rapid credit growth has created an emerging market luxury goods boom that has bolstered the fortunes of European luxury brands - a main reason why Europe's economic crisis is not far worse than it is now.
(Note: the charts below are just a small selection of the many emerging market countries that have housing bubbles.)
Hong Kong's Housing Bubble
South Korea's Housing Bubble
Malaysia's Housing Bubble
The Philippines' Housing Bubble
India's Housing Bubble
Israel's Housing Bubble
Colombia's Housing Bubble
The Post-2009 Northern & Western European Housing Bubble
While the world has been laser-focused on the woes of the heavily-indebted PIIGS nations for the last couple of years, property markets in Northern and Western European countries have been bubbling up to dizzying new heights in a repeat performance of the very property bubbles that caused the global financial crisis in the first place. Nordic and Western European countries such as Norway and Switzerland have attracted strong investment inflows due to their perceived economic safe-haven statuses, serving to further inflate these countries' preexisting property bubbles that had expanded from the mid-1990s until 2008. With their overheated economies and ballooning property bubbles, today's safe-haven European countries may very well be tomorrow's Greece and Italy. (Note: the charts below are just a small selection of the many northern and western European countries that have housing bubbles.)
The UK and London Housing Bubble:
France's Housing Bubble (incl. Paris Housing Bubble)
Chart Source: Bulle-Immobiliere.org
Switzerland's Housing Bubble
Austria's Housing Bubble
Sweden's Housing Bubble
Norway's Housing Bubble
Finland's Housing Bubble
Your eyes are not deceiving you - the world is experiencing a massive Post-2009 Housing Bubble that will pop and finish where the U.S. and PIIGS housing bubbles left off in 2008. The global economy has "recovered" from the Great Recession on the backs of more housing bubbles - this is why I call the recovery a "bubblecovery." Believe it or not, the Post-2009 Global Housing Bubble has the potential to grow larger due to global central banks' incredibly stimulative monetary policies that have been implemented as a response to the Global Financial Crisis. When this epic pan-country housing bubble finally pops, it could conceivably throw the world into a devastating depression.
There are a dizzying number of ways to play the impeding pop of the Post-2009 Global Housing Bubble, but the most straightforward way is to short various exchange traded funds of the countries or regions that currently have housing bubbles.
Here are emerging market (including China) ETFs: iShares MSCI Emerging Markets ETF (EEM), the Guggenheim Frontier Markets ETF (FRN), iShares S&P Latin America 40 Index ETF (ILF), the Claymore/BNY Mellon BRIC ETF (EEB), the SPDR S&P Emerging Middle East & Africa ETF (GAF), the iShares MSCI Emerging Markets Eastern Europe Index ETF (ESR), the Dreyfus Emerging Currency Fund (CEW) and the Market Vectors EM Local Currency Bond ETF (EMLC).
Here are some options in individual emerging market country ETFs: the Guggenheim China Real Estate ETF (TAO), the iShares FTSE/Xinhua China 25 Index ETF (FXI), the iShares MSCI Brazil Index ETF (EWZ), the iPath MSCI India Index ETN (INP), the Market Vectors Russia ETF (RSX), the MSCI Israel Capped Investable Market Index Fund (EIS), the iShares MSCI Turkey Investable Market Index Fund (TUR), the iShares MSCI South Africa Index ETF (EZA), the iShares MSCI Indonesia Investable Market Index ETF (EIDO), the iShares MSCI Hong Kong Index Fund (EWH), the iShares MSCI Singapore Index ETF (EWS), the iShares MSCI Malaysia Index ETF (EWM), the iShares MSCI South Korea Index ETF (EWY), the iShares MSCI Taiwan Index ETF (EWT), the iShares MSCI Thailand Investable Market Index ETF (THD), the iShares MSCI Philippines (EPHE), the Market Vectors Vietnam ETF (VNM), and the Global X FTSE Colombia 20 ETF (GXG).