Chart: Canadian Housing is Being Propped Up by Just One City
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Canadian Housing is Being Propped Up by Just One City [Chart]

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Canadian Housing is Being Propped Up by Just One City [Chart]

Canadian Housing is Being Propped Up by Just One City

Without Vancouver’s gains, the market would have dipped -1.1% in February 2016

The Chart of the Week is a weekly Visual Capitalist feature on Fridays.

“Markets can remain irrational longer than you can remain solvent.” – John Maynard Keynes

The last time we gave a good run down of Canada’s housing market was in May 2015, when we noted that The Economist gave it the dubious title of the most overvalued housing market in the world. Since then, in just 10 months, prices in Vancouver and Toronto have soared to marks that are 14.1% and 8.7% higher respectively.

Frothy prices, million-dollar shacks, and buying frenzies have prompted world-class short-sellers to come out of the woodwork. For a speculator such as Marc Cohodes, who advises hedge funds on Wall Street that want to bet against the Canadian housing market, this type of classic bubble behavior is music to his ears.

“The cross currents are beyond crazy in Vancouver — it’s a mix of money laundering, speculation, low interest rates,” says Cohodes, who was once profiled as Wall Street’s highest-profile short-seller by the New York Times. “A house is something you live in, but in Vancouver you guys are trading them like the penny stocks on Howe Street.”

Mr. Cohodes has recently said that Canadian real estate has reached “peak insanity”, and it’s part of the reason that investors around the world are trying to find a way to bet against the market.

Home Capital Group, one of Canada’s largest financial institutions, was one of the most-shorted stocks last year on Canadian exchanges. The same alternative mortgage lender recently also came under scrutiny for suspending 45 of its brokers for falsifying borrower income.

Dominos Falling

Just as falling oil prices helped to drag the Canadian dollar down, the “lower for longer” price environment for crude has had a similar effect on house prices in the Prairies. Homes in Fort McMurray, the epicenter of the Canadian oil sands, have crashed an average of $117,000 in just a year.

Meanwhile, price tags in the once-strong housing market of Calgary have declined from their peak in October 2014 by -5.4%. The city, which is a financial center for Canadian energy, is bracing for a particular tough year ahead as well. Houses are spending more time on the market, and sales volume and prices continue to fall.

But it’s not just Canada’s oilpatch that is starting to see the writing on the wall. Toronto, which has helped to buoy the rest of the country’s housing growth for years, has also started to cool down.

According to the Teranet – National Bank House Price Index, prices have risen just 0.3% since October in Canada’s largest real estate market. With the prospect of rising interest rates in the future, it’s not expected to heat back up, either. In fact, TD Bank expects that Toronto will have a “moderate” decline in 2017.

And Then There was One…

For investors bullish on near-term gains in Canada’s housing sector, there is one last hope that resides on the West Coast.

Vancouver’ housing market sailed again in February, shooting up a record 3.2% in just one month. This is the best month for the market since August 2006. It was so good, in fact, that it single-handedly propped up Canada’s national index for housing.

Canada’s market as a whole saw gains of 0.6% in the month, but it would have dropped to a lacklustre -1.1% without the inclusion of Vancouver in the 11-city index.

The only problem?

The city, which has been a primary beneficiary of rampant foreign buying, is continually cited as the market most ripe for a deep correction, as it continues to defy all common sense.

While Keynes is right in that markets can remain irrational for longer than one can stay solvent, it seems that Canadian housing has turned a corner: regional markets in other parts of the country have stumbled, and the last remaining pillar is Vancouver.

It may continue to buck the trend for now, but it is a wobbly pillar at best.

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Mapped: GDP Growth Forecasts by Country, in 2023

The global economy faces an uncertain future in 2023. This year, GDP growth is projected to be 2.9%—down from 3.2% in 2022.

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GDP Growth

Mapped: GDP Growth Forecasts by Country, in 2023

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Since Russia’s invasion of Ukraine early last year, talk of global recession has dominated the outlook for 2023.

High inflation, spurred by rising energy costs, has tested GDP growth. Tightening monetary policy in the U.S., with interest rates jumping from roughly 0% to over 4% in 2022, has historically preceded a downturn about one to two years later.

For European economies, energy prices are critical. The good news is that prices have fallen recently since March highs, but the continent remains on shaky ground.

The above infographic maps GDP growth forecasts by country for the year ahead, based on projections from the International Monetary Fund (IMF) October 2022 Outlook and January 2023 update.

2023 GDP Growth Outlook

The world economy is projected to see just 2.9% GDP growth in 2023, down from 3.2% projected for 2022.

This is a 0.2% increase since the October 2022 Outlook thanks in part to China’s reopening, higher global demand, and slowing inflation projected across certain countries in the year ahead.

With this in mind, we show GDP growth forecasts for 191 jurisdictions given multiple economic headwinds—and a few emerging bright spots in 2023.

Country / Region2023 Real GDP % Change (Projected)
🇦🇱 Albania2.5%
🇩🇿 Algeria2.6%
🇦🇴 Angola3.4%
🇦🇬 Antigua and Barbuda5.6%
🇦🇷 Argentina*2.0%
🇦🇲 Armenia3.5%
🇦🇼 Aruba2.0%
🇦🇺 Australia*1.6%
🇦🇹 Austria1.0%
🇦🇿 Azerbaijan2.5%
🇧🇭 Bahrain3.0%
🇧🇩 Bangladesh6.0%
🇧🇧 Barbados5.0%
🇧🇾 Belarus0.2%
🇧🇪 Belgium0.4%
🇧🇿 Belize2.0%
🇧🇯 Benin6.2%
🇧🇹 Bhutan4.3%
🇧🇴 Bolivia3.2%
🇧🇦 Bosnia and Herzegovina2.0%
🇧🇼 Botswana4.0%
🇧🇷 Brazil*1.2%
🇧🇳 Brunei Darussalam3.3%
🇧🇬 Bulgaria3.0%
🇧🇫 Burkina Faso4.8%
🇧🇮 Burundi4.1%
🇨🇻 Cabo Verde4.8%
🇨🇲 Cameroon4.6%
🇰🇭 Cambodia6.2%
🇨🇦 Canada*1.5%
🇨🇫 Central African Republic3.0%
🇹🇩 Chad3.4%
🇨🇱 Chile-1.0%
🇨🇳 China*5.3%
🇨🇴 Colombia2.2%
🇰🇲 Comoros3.4%
🇨🇷 Costa Rica2.9%
🇨🇮 Côte d'Ivoire6.5%
🇭🇷 Croatia3.5%
🇨🇾 Cyprus2.5%
🇨🇿 Czech Republic1.5%
🇨🇩 Democratic Republic of the Congo6.7%
🇩🇰 Denmark0.6%
🇩🇯 Djibouti5.0%
🇩🇲 Dominica4.9%
🇩🇴 Dominican Republic4.5%
🇪🇨 Ecuador2.7%
🇪🇬 Egypt*4.0%
🇸🇻 El Salvador1.7%
🇬🇶 Equatorial Guinea-3.1%
🇪🇷 Eritrea2.9%
🇪🇪 Estonia1.8%
🇸🇿 Eswatini1.8%
🇪🇹 Ethiopia5.3%
🇫🇯 Fiji6.9%
🇫🇮 Finland0.5%
🇫🇷 France*0.7%
🇲🇰 North Macedonia3.0%
🇬🇦 Gabon3.7%
Georgia4.0%
Germany*0.1%
Ghana2.8%
Greece1.8%
Grenada3.6%
Guatemala3.2%
Guinea5.1%
Guinea-Bissau4.5%
Guyana25.2%
Haiti0.5%
Honduras3.5%
Hong Kong SAR3.9%
Hungary1.8%
Iceland2.9%
India*6.1%
Indonesia*4.8%
Iraq4.0%
Ireland4.0%
Iran*2.0%
Israel3.0%
Italy*0.6%
Jamaica3.0%
Japan*1.8%
Jordan2.7%
Kazakhstan*4.3%
Kenya5.1%
Kiribati2.4%
South Korea*1.7%
Kosovo3.5%
Kuwait2.6%
Kyrgyz Republic3.2%
Lao P.D.R.3.1%
Latvia1.6%
Lesotho1.6%
Liberia4.2%
Libya17.9%
Lithuania1.1%
Luxembourg1.1%
Macao SAR56.7%
Madagascar5.2%
🇲🇼 Malawi2.5%
🇲🇾 Malaysia*4.4%
🇲🇻 Maldives6.1%
🇲🇱 Mali5.3%
🇲🇹 Malta3.3%
🇲🇭 Marshall Islands3.2%
🇲🇷 Mauritania4.8%
🇲🇺 Mauritius5.4%
🇲🇽 Mexico*1.7%
🇫🇲 Micronesia2.9%
🇲🇩 Moldova2.3%
🇲🇳 Mongolia5.0%
🇲🇪 Montenegro2.5%
🇲🇦 Morocco3.1%
🇲🇿 Mozambique4.9%
🇲🇲 Myanmar3.3%
🇳🇦 Namibia3.2%
🇳🇷 Nauru2.0%
🇳🇵 Nepal5.0%
🇳🇱 Netherlands*0.6%
🇳🇿 New Zealand1.9%
🇳🇮 Nicaragua3.0%
🇳🇪 Niger7.3%
🇳🇬 Nigeria*3.2%
🇳🇴 Norway2.6%
🇴🇲 Oman4.1%
🇵🇰 Pakistan*2.0%
🇵🇼 Palau12.3%
🇵🇦 Panama4.0%
🇵🇬 Papua New Guinea5.1%
🇵🇾 Paraguay4.3%
🇵🇪 Peru2.6%
🇵🇭 Philippines*5.0%
🇵🇱 Poland*0.3%
🇵🇹 Portugal0.7%
🇵🇷 Puerto Rico0.4%
🇶🇦 Qatar2.4%
🇨🇬 Republic of Congo4.6%
🇷🇴 Romania3.1%
🇷🇺 Russia*0.3%
🇷🇼 Rwanda6.7%
🇼🇸 Samoa4.0%
🇸🇲 San Marino0.8%
🇸🇹 São Tomé and Príncipe2.6%
🇸🇦 Saudi Arabia*2.6%
🇸🇳 Senegal8.1%
🇷🇸 Serbia2.7%
🇸🇨 Seychelles5.2%
🇸🇱 Sierra Leone3.3%
🇸🇬 Singapore2.3%
🇸🇰 Slovak Republic1.5%
🇸🇮 Slovenia1.7%
🇸🇧 Solomon Islands2.6%
🇸🇴 Somalia3.1%
🇿🇦 South Africa*1.2%
🇸🇸 South Sudan5.6%
🇪🇸 Spain*1.1%
🇱🇰 Sri Lanka-3.0%
🇰🇳 St. Kitts and Nevis4.8%
🇱🇨 St. Lucia5.8%
🇻🇨 St. Vincent and the Grenadines6.0%
🇸🇩 Sudan2.6%
🇸🇷 Suriname2.3%
🇸🇪 Sweden-0.1%
🇨🇭 Switzerland0.8%
🇹🇼 Taiwan2.8%
🇹🇯 Tajikistan4.0%
🇹🇿 Tanzania5.2%
🇹🇭 Thailand*3.7%
🇧🇸 The Bahamas4.1%
🇬🇲 The Gambia6.0%
🇹🇱 Timor-Leste4.2%
🇹🇬 Togo6.2%
🇹🇴 Tonga2.9%
🇹🇹 Trinidad and Tobago3.5%
🇹🇳 Tunisia1.6%
🇹🇷 Turkey*3.0%
🇹🇲 Turkmenistan2.3%
🇹🇻 Tuvalu3.5%
🇺🇬 Uganda5.9%
🇺🇦 UkraineN/A
🇦🇪 United Arab Emirates4.2%
🇬🇧 United Kingdom*-0.6%
🇺🇲 U.S.*1.4%
🇺🇾 Uruguay3.6%
🇺🇿 Uzbekistan4.7%
🇻🇺 Vanuatu3.1%
🇻🇪 Venezuela6.5%
🇻🇳 Vietnam6.2%
West Bank and Gaza3.5%
🇾🇪 Yemen3.3%
🇿🇲 Zambia4.0%
🇿🇼 Zimbabwe2.8%

*Reflect updated figures from the January 2023 IMF Update.

The U.S. is forecast to see 1.4% GDP growth in 2023, up from 1.0% seen in the last October projection.

Still, signs of economic weakness can be seen in the growing wave of tech layoffs, foreshadowed as a white-collar or ‘Patagonia-vest’ recession. Last year, 88,000 tech jobs were cut and this trend has continued into 2023. Major financial firms have also followed suit. Still, unemployment remains fairly steadfast, at 3.5% as of December 2022. Going forward, concerns remain around inflation and the path of interest rate hikes, though both show signs of slowing.

Across Europe, the average projected GDP growth rate is 0.7% for 2023, a sharp decline from the 2.1% forecast for last year.

Both Germany and Italy are forecast to see slight growth, at 0.1% and 0.6%, respectively. Growth forecasts were revised upwards since the IMF’s October release. However, an ongoing energy crisis exposes the manufacturing sector to vulnerabilities, with potential spillover effects to consumers and businesses, and overall Euro Area growth.

China remains an open question. In 2023, growth is predicted to rise 5.2%, higher than many large economies. While its real estate sector has shown signs of weakness, the recent opening on January 8th, following 1,016 days of zero-Covid policy, could boost demand and economic activity.

A Long Way to Go

The IMF has stated that 2023 will feel like a recession for much of the global economy. But whether it is headed for a recovery or a sharper decline remains unknown.

Today, two factors propping up the global economy are lower-than-expected energy prices and resilient private sector balance sheets. European natural gas prices have sunk to levels seen before the war in Ukraine. During the height of energy shocks, firms showed a notable ability to withstand astronomical energy prices squeezing their finances. They are also sitting on significant cash reserves.

On the other hand, inflation is far from over. To counter this effect, many central banks will have to use measures to rein in prices. This may in turn have a dampening effect on economic growth and financial markets, with unknown consequences.

As economic data continues to be released over the year, there may be a divergence between consumer sentiment and whether things are actually changing in the economy. Where the economy is heading in 2023 will be anyone’s guess.

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