Connect with us

Chart of the Week

Mapped: The Countries With the Highest Housing Bubble Risks

Published

on

Mapped: The Countries With the Highest Housing Bubble Risks

Mapped: Countries With the Highest Housing Bubble Risks

With a decade-long bull market and an ultra low interest rate environment globally, it’s not surprising to see capital flock to housing assets.

For many investors, real estate is considered as good of a place as any to park money—but what happens when things get a little too frothy, and the fundamentals begin to slip away?

In recent years, experts have been closely watching several indicators that point to rising bubble risks in some housing markets. Further, they are also warning that countries like Canada and New Zealand may be overdue for a correction in housing prices.

Key Housing Market Indicators

Earlier this week, Bloomberg published results from a new study by economist Niraj Shah as he aimed to build a housing bubble dashboard.

It tracks four key metrics:

  1. House Price-Rent Ratio
    The ratio of house prices to the annualized cost of rent
  2. House Price-Income Ratio
    The ratio of house prices to household income
  3. Real House Prices
    Housing prices adjusted for inflation
  4. Credit to Households (% of GDP)
    Amount of debt held by households, compared to total economic output

Ranking high on just one of these metrics is a warning sign for a country’s housing market, while ranking high on multiple measures signals even greater fragility.

Housing Bubble Risks, by Indicator

Let’s look at each bubble risk indicator, and see how they apply to the 22 countries covered by the housing dashboard.

It should be noted that most of the measures here are shown in an index form, using the year 2015 as a base year. In other words, the data is not representative of the ratio itself—but instead, how much the ratio has risen or fallen since 2015.

1. House Price-Rent Ratio

When looking at housing prices in comparison to rents, there are four countries that stand out.

New Zealand (196.8) and Canada (195.9) have seen ratios of housing prices to rents nearly double since 2015. Meanwhile, Sweden (172.8) and Norway (168.2) are not far behind.

Elsewhere in the world, this ratio is much more in line with expectations. For example, in Portugal—where house prices have skyrocketed over recent years—rents have increased at nearly the same rate, giving the country a 99.2 score.

2. House Price-Income Ratio

There are three familiar names at the top of this bubble indicator: New Zealand (156.8), Canada (155.3), and Sweden (145.7).

In places where rents are lagging housing prices, so are the levels of household income. For how long will people afford to buy increasingly expensive houses, if their incomes continue to lag?

3. Real House Prices

Real house prices have increased in all of the 22 markets, with the exception of Italy (95.5).

For this indicator, there are five markets that stand out as having fast-rising prices: Portugal (131.8), Ireland (127.6), Netherlands (121.9), Canada (124.1), and New Zealand (121.9). The latter two (Canada/New Zealand) have appeared near the top of all three bubble indicators, so far.

4. Credit to Households (% of GDP)

Exceedingly high debt ratios point to a strain on consumer finances – and when finances are strained, the chance of a default increases.

Switzerland (128.7%), Australia (120.3%), and Denmark (115.4%) top the list here with consumer debt far exceeding country GDP levels. However, Canada still makes an appearance in the top five with a debt-to-GDP ratio of 100.7%.

Subscribe to Visual Capitalist

Thank you!
Given email address is already subscribed, thank you!
Please provide a valid email address.
Please complete the CAPTCHA.
Oops. Something went wrong. Please try again later.

Continue Reading
Comments

Chart of the Week

The Big Five: Largest Acquisitions by Tech Company

The ‘Big Five’ tech companies are rapidly reshaping the global tech landscape with their acquisitions, devouring any competitor who gets in their way.

Published

on

The Big Five: Largest Acquisitions by Tech Company

The Big Five tech giants, or “FAAMG”—Facebook, Amazon, Apple, Microsoft, and Google (Alphabet)—have a combined market capitalization of over $4 trillion.

These powerful tech behemoths often devour the talent, technology, or entire businesses of aspiring competitors. Given their financial weight, mergers and acquisitions have become a key tactic in maintaining their strong grip on tech supremacy.

Today’s Chart of the Week explores the world’s most powerful tech companies and their biggest acquisitions to date.

Which Acquisitions Were a Success?

While these tech giants may have had big aspirations for these exceedingly large deals, they have mixed success rates.

Microsoft

Microsoft made its big move 2016 to buy LinkedIn for $26.2 billion, and it’s the most sizable acquisition by any of the Big Five tech companies.

Microsoft’s 5 Biggest Acquisitions:

Acquisition (Year)AmountCategory
LinkedIn (2016)$26.2 billionSocial Media
Skype (2011)$8.5 billionTelecommunications
GitHub (2018)$7.5 billionSoftware
Nokia (2014)$7.2 billionTelecommunications
aQuantive (2007)$6.3 billionMarketing

The LinkedIn deal was made due to the synergy between the two companies’ offerings, and Microsoft’s desire to gain access to LinkedIn’s 575 million members.

However, not all of Microsoft’s acquisitions have been as successful, such as its 2014 purchase of Nokia’s Devices & Services business for $7.2 billion. This seemed like a smart move at the time, considering the Finnish company held 41% of the global handset market.

Yet, Microsoft sold the asset for a mere $350 million just two years later. Microsoft shifted its strategy and exited the feature phone market, choosing to focus on a narrow, niche market for their hardware.

Amazon

Amazon has closed more than $20 billion in acquisitions and investments since 2017. This includes the purchase of Whole Foods, which Amazon bought for $13.7 billion, and is the company’s largest acquisition to date.

Amazon’s 5 Biggest Acquisitions:

Acquisition (Year)AmountCategory
Whole Foods (2017)$13.7 billionRetail
Zappos (2009)$1.2 billionRetail
Ring (2018)$1.2 billionTechnology
PillPack (2018)$1 billionPharmaceuticals
Twitch (2014)$970 millionSocial Media

From purchases to bolster the AI of smart assistant Alexa, to Wi-Fi enabled doorbell Ring, recent additions clearly show the company intends to cement its presence in people’s homes.

After acquiring Whole Foods, Amazon began offering store discounts to Prime customers, in an attempt to bundle its home offerings and provide a more holistic customer experience.

Alphabet

Alphabet has made several daring moves into the hardware and data science sectors. The company’s biggest acquisition was Motorola, which it bought in 2012 for $12.5 billion.

Alphabet’s 5 Biggest Acquisitions:

Acquisition (Year)AmountCategory
Motorola (2012)$12.5 billionTelecommunications
Nest (2014)$3.2 billionTechnology
DoubleClick (2007)$3.1 billionMarketing
Looker (2019)$2.6 billionSoftware
YouTube (2006)$1.7 billionSocial Media

However, the purchase of Motorola was a bet that didn’t pay off. Alphabet sold off much of Motorola’s assets for less than $3 billion in 2014, a little less than two years after it had originally acquired it.

Alphabet continues to consolidate its acquisitions in order to simplify its organizational structure. DoubleClick, acquired in 2007, merged with Google Analytics 360 Suite under the Google Marketing Platform—making it easier for marketers to access their metrics using one platform.

Apple

Out of the Big Five companies, Apple has the fewest acquisitions over $1 billion. Its largest purchase was for Beats Electronics, which it acquired for $3 billion in 2014.

Apple’s 5 Biggest Acquisitions

Acquisition (Year)AmountCategory
Beats (2014)$3 billionMusic
Dialog Semiconductor (2018)$600 millionManufacturing
Anobit (2011)$500 millionManufacturing
Shazam (2017)$400 millionMusic
NeXT Computer (1996)$400 millionTechnology

Apple’s increasing music streaming efforts have been evident, with the acquisition of Shazam three years after it purchased Beats Electronics.

In an intriguing recent turn of events, Apple recently announced it will acquire the majority of Intel’s smartphone modem business. This $1 billion deal will allow Apple to build all of its devices in-house, and better prepare the iPhone for the upcoming 5G push.

Facebook

Facebook’s largest acquisition has been WhatsApp Messenger, which it purchased for $22 billion in 2014. The WhatsApp acquisition is the second largest of the Big Five, following Microsoft’s LinkedIn purchase.

Facebook’s 5 Biggest Acquisitions:

Acquisition (Year)AmountCategory
WhatsApp (2014)$22 billionSocial Media
Oculus (2014)$2 billionTechnology
Instagram (2012)$1 billionSocial Media
LiveRail (2014)$500 millionMarketing
Onavo (2013)$200 millionAnalytics

Aside from absorbing any competitors who encroach on Facebook’s turf—such as WhatsApp and Instagram—Facebook’s takeovers have been aimed at venturing into uncharted territory. The acquisition of virtual reality manufacturer, Oculus, is evidence of Facebook’s bet on virtual reality as the future of engagement.

“After games, we’re going to make Oculus a platform for many other experiences. Imagine enjoying a court side seat at a game, or studying in a classroom of students and teachers all over the world —just by putting on goggles in your home.”

—Mark Zuckerberg

Predicting the Next Shift

The Big Five are some of the most influential companies in the world today.

Beyond rapidly reshaping the global tech landscape, these acquisitions provide important context on how tech companies consolidate power—and, more importantly, what will fuel their next phase of growth.

Subscribe to Visual Capitalist

Thank you!
Given email address is already subscribed, thank you!
Please provide a valid email address.
Please complete the CAPTCHA.
Oops. Something went wrong. Please try again later.

Continue Reading

Chart of the Week

The Most Miserable Countries in the World

The annual Misery Index ranks the most and least miserable countries, based on four economic factors—unemployment, inflation, lending rates, and GDP growth.

Published

on

The Most Miserable Countries in the World

Some people believe that happiness comes from within. In the world of economics, however, happiness may be more linked to quantitative factors such as inflation, lending rates, employment levels, and growth in gross domestic product (GDP).

This week’s chart uses data from Steve Hanke of the Cato Institute, and it visualizes the 2019 Misery Index rankings, across 95 countries that report this data on a consistent basis.

The index uses four key economic variables to rank and score countries:

  1. Inflation
  2. Lending rate
  3. Unemployment rate
  4. GDP per capita growth

Here are the Misery Index scores for all 95 countries:

RankCountryContributing FactorMisery Index Score
#1🇻🇪 VenezuelaInflation1,746,439.1
#2🇦🇷 ArgentinaInflation105.6
#3🇮🇷 IranInflation75.7
#4🇧🇷 BrazilLending Rates53.6
#5🇹🇷 TurkeyUnemployment53.3
#6🇳🇬 NigeriaUnemployment43.0
#7🇿🇦 South AfricaUnemployment42.0
#8🇧🇦 Bosnia and HerzegovinaUnemployment38.2
#9🇪🇬 EgyptLending Rates36.8
#10🇺🇦 UkraineLending Rates34.3
#11NicaraguaUnemployment31.3
#12JordanUnemployment30.9
#13UruguayLending Rates27.1
#14HondurasUnemployment26.8
#15MacedoniaUnemployment26.4
#16ArmeniaUnemployment25.1
#17JamaicaLending Rates24.9
#18Saudi ArabiaUnemployment23.5
#19ColombiaLending Rates23.2
#20ParaguayLending Rates22.9
#21GreeceUnemployment22.5
#22AlgeriaUnemployment21.9
#23Costa RicaLending Rates21.7
#24PeruLending Rates21.2
#25AzerbaijanLending Rates21.0
#26Dominican RepublicLending Rates & Unemployment20.3
#27KazakhstanLending Rates20.1
#28BarbadosUnemployment19.7
#29Papua New GuineaLending Rates19.2
#30GeorgiaUnemployment18.8
#31MauritiusLending Rates17.9
#32SerbiaUnemployment17.4
#33GuatemalaLending Rates17.2
#34PakistanLending Rates16.7
#35Sri LankaLending Rates16.0
#36SpainUnemployment15.9
#37RussiaLending Rates15.7
#38MexicoLending Rates15.4
#39IndonesiaLending Rates15.2
#40Trinidad & TobagoLending Rates14.7
#41New ZealandLending Rates14.4
#42ItalyUnemployment13.7
#43MaliUnemployment13.6
#44IndiaLending Rates13.2
#45BangladeshLending Rates12.6
#46AlbaniaLending Rates12.2
#47EcuadorUnemployment12.2
#48El SalvadorUnemployment12.0
#49PhilipinesLending Rates11.8
#50CyprusUnemployment11.7
#51CroatiaUnemployment10.9
#52BoliviaLending Rates10.8
#53CanadaUnemployment10.8
#54PanamaLending Rates10.7
#55FranceUnemployment10.7
#56AustraliaUnemployment10.6
#57KuwaitLending Rates10.5
#58ChileUnemployment10.3
#59EstoniaUnemployment10.3
#60RomaniaLending Rates10.3
#61IcelandLending Rates9.7
#62United KingdomLending Rates9.6
#63BelgiumUnemployment9.3
#64NorwayUnemployment9.3
#65SwedenUnemployment8.8
#66MoldovaLending Rates8.8
#67VietnamLending Rates8.7
#68United StatesLending Rates8.7
#69BulgariaUnemployment8.6
#70FinlandUnemployment8.3
#71Hong KongLending Rates8.3
#72PortugalUnemployment8.2
#73LithuaniaUnemployment7.3
#74SloveniaUnemployment7.2
#75LatviaUnemployment7.0
#76IsraelUnemployment6.8
#77DenmarkUnemployment6.8
#78South KoreaUnemployment6.5
#79PolandUnemployment6.5
#80QatarLending Rates5.8
#81SlovakiaUnemployment5.7
#82GermanyUnemployment5.6
#83MaltaUnemployment5.3
#84SingaporeLending Rates5.2
#85IrelandUnemployment5.1
#86MalaysiaLending Rates5.1
#87Czech RepublicLending Rates5.0
#88NetherlandsUnemployment4.7
#89TaiwanUnemployment4.4
#90SwitzerlandLending Rates4.2
#91ChinaLending Rates4.2
#92AustriaUnemployment3.9
#93JapanUnemployment3.3
#94HungaryUnemployment2.6
#95ThailandLending Rates1.7

To calculate each Misery Index score, a simple formula is used: GDP per capita growth is subtracted from the sum of unemployment, inflation, and bank lending rates.

Which of these factors are driving scores in some of the more “miserable” countries? Which countries rank low on the list, and why?

The Highest Misery Index Scores

Two Latin American countries, Venezuela and Argentina, rank near the top of Hanke’s index.

1. Vexation in Venezuela

Venezuela holds the title of the most “miserable” country in the world for the fourth consecutive year in a row. According to the United Nations, four million Venezuelans have left the country since its economic crisis began in 2014.

Turmoil in Venezuela has been further fueled by skyrocketing hyperinflation. Citizens struggle to afford basic items such as food, toiletries, and medicine. The Cafe Con Leche Index was created specifically to monitor the rapidly changing inflation rates in Venezuela.

Not only does Venezuela have the highest score in the Misery Index, but its score has also seen a dramatic increase over the past year as the crisis has accelerated.

2. Argentina’s History of Volatility

Argentina is the second most “miserable” country, which comes as no surprise given the country’s history of economic crises.

The 2018 Argentine monetary crisis caused a severe devaluation of the peso. The downfall forced the President, Mauricio Macri, to request a loan from the International Monetary Fund (IMF).

To put things in perspective, this is the 22nd lending arrangement between Argentina and the IMF. Only six countries have had more commitments to the international organization, including Haiti (27) and Colombia (25).

The Lowest Misery Index Scores

The two countries with the lowest scores in the index have one thing in common: extremely low rates of unemployment.

1. Why Thailand is the Land of Smiles

Thailand takes the prize as the least “miserable” country in the world on the index. The country’s unemployment rate has been remarkably low for years, ranging between 0.4% and 1.2% since 2011. This is the result of the country’s unique structural factors. The “informal” sectors—such as street vendors or taxi drivers—absorb people who become unemployed in the “formal” sector.

Public infrastructure investments by the Thai government continue to attract both private domestic and foreign investments, bolstering the country’s GDP alongside tourism and exports.

2. Hungary’s Prime Minister Sets the Score

Hungary is the second least “miserable” country in the world according to the index.

In 2010, Prime Minister Viktor Orbán implemented a workfare program which diverted menial tasks to thousands of job seekers. Over the same period that the program ran, the national unemployment rate fell from 11.4% to 3.8%.

Orbán won a controversial fourth term in 2018, possibly in part due to promises to protect the country’s sovereignty against the European Union. Despite accusations of populism and even authoritarian tendencies, the Prime Minister still commands a strong following in Hungary.

Subscribe to Visual Capitalist

Thank you!
Given email address is already subscribed, thank you!
Please provide a valid email address.
Please complete the CAPTCHA.
Oops. Something went wrong. Please try again later.

Continue Reading
Novagold Company Spotlight

Subscribe

Join the 130,000+ subscribers who receive our daily email

Thank you!
Given email address is already subscribed, thank you!
Please provide a valid email address.
Please complete the CAPTCHA.
Oops. Something went wrong. Please try again later.

Popular