I've been following Mish for several years and after he correctly called the global housing crash well in advance, I have come to respect his predictions. I find his recent blog regarding the notion of a bubble ready to burst and so called "Ponzy lending" in China very interesting. Given that almost all current real estate buyers, above a certain price-point, are Iranian and Chinese, this article may serve as a warning to those who believe that Vancouver's real estate market is amune to global economic dynamics.
Here's an excerpt:
China's property bubble is now on the verge of collapse. Transaction volumes are significantly down and declining volume is how property bubbles always burst. In simple terms, the pool of greater fools eventually runs out.
In China's case, the pool of fools is heavily involved in "loan shark" schemes where speculators hope property values rise fast enough to cover the interest.
Click here for Mish's BLOG or click to read the entire article: http://bit.ly/bgCmtb
Indeed, the truth may be quite the contrary: Much of Vancouver's flagging luxury real estate market is being driven by Chinese buyers and if China does experience a housing bust, we could see an exodus from our market at fire-sale prices. It's my opinion that many pundits do not display an adequate level of respect for the influence that international buyers, who are most definitely affected by global economic macros, have on Vancouver's market.
Why BLOG this myself? Because I see so many sellers hanging onto the fantasy that nothing has changed in Vancouver's real estate marklet and that it will keep climbing forever. Maybe it will, but if the USA continues to struggle and China joins the long list of bubble-burst economies, sellers in Vancouver will be in trouble. I just can't see anything wrong with cashing out near the top of a decade of record growth, even if it's not at the very peak.
Remember, bulls make money, bears make money and piggies get slaughtered. Be careful not to confuse brains for a bull market!