Juggling Dynamite

Canadian real estate prices have increased by 88% since 2005–nearly triple the pace of any G7 country (red line below since 1975). The next closest is Germany (in yellow), with an increase of 32.3% over the same period.  Historical precedents are daunting for Canada.
After bubbling into a 2005 peak, US real estate prices (in blue) collapsed over 30% and were still -15% a decade later in 2015.  Rising since then, in 2020, US prices are now just 3.0% above their peak 15 years ago.  Japanese real estate prices (above in green) also collapsed from a bubble peak in 1990 to be -44% by 2008 and have flatlined since.

Canada has paid for unaffordable housing with unsustainable debt levels, diminished household savings and a loss of economic productivity.  All are likely to exact a negative financial toll for years to come.  See more from Better Dwelling here:  Canada doubles down on real estate since 2005. Now it’s the biggest bubble the G7 has ever seen, and its getting bigger:

“Since the Global Financial Crisis, Canada has leaned on non-productive investment, and it shows. The rate of residential investment to GDP more than doubled from 2000 to 2020. Last year, real estate transactions were generating almost half of all GDP growth. This isn’t just a Toronto and Vancouver thing either. The national index outpaces growth for every other G7 country, and is more than double the next one. With the government currently dedicating an unusual amount of resources to driving home prices during this recession, they’re shooting to go all-in or for failure.”

The slowdown in global economic activity has been accelerated by COVID-19 but was ongoing well before it as debt weight and aged populations continue to curb consumption.  This has implications for all countries but particularly those with less household wealth who have built their economies on the presumption of ever-expanding consumer debt and leaping demand abroad.  China–the world’s second-largest economy–is a key example.  See China’s debt collectors flourish as consumers flounder in COVID-hit economy.

China has been the largest commodity consumer over the last couple of decades in order to build domestic infrastructure and export goods for other countries.  Now, intensifying trade wars and the deepest recession since the 1930s are hurting demand for both finished goods and most raw materials globally.  Chinese economic expert Leland R. Miller understands the numbers and impacts in more detail than most and his recent discussion with Danielle DiMartino Booth is worthwhile.

Economist Danielle DiMartino Booth sits down with Chinese Economy expert Leland Miller. About the guest: Leland R. Miller is the Chief Executive Officer of China Beige Book International. Here is a direct video link.

According to the United Nations COMTRADE database on international trade, Canada exported US $17.49 Billion in goods to China during 2019, 93.5% of it was commodities.  Diversifying our economy to increase finished goods and services as well as household savings (rather than debt) is critical to our future prospects. Miller speaks specifically about the challenge to commodity exporters starting around the 25-minute mark in this interview.  He opines on the US dollar benchmark currency status starting around the 1:12 mark.

The COVID-19 pandemic is changing the way we perceive and manage workspaces.

Plexiglass dividers and floor decals might not be permanent, but the pandemic will bring lasting change to offices. Experts from the architecture and real-estate industries share how they are getting back to work and what offices will look like in the future.  Here is a direct video link.