So I was perusing Google Trends recently and decided to plug in a few terms related to Canada’s real estate bubble and bankruptcy. Oh, hi. It’s been awhile. The nose is at 99% healed since the surgery in December – nose is great, life changing. The eyes are at around 95% healed since the laser eye surgery in March – eyes are great, life changing. Finished the pilot Valuation online certificate through NYU – spectacularly imploded and failed the final exam but redeemed myself on the valuation project to pass the program with high honours in the 60ish percentish final grade range. Since the course ended in May, I have had very little interest in any type of learning outside of casual reading. Time’s been filled with outdoor fun since June. Alright, with the little life update out of the way, let’s dive into some interesting data.
When you search for the term “filing bankruptcy” in Google Trends over the past 5 years, you get this for worldwide searches:
Not much going on, seems fairly steady.
When you search the UK specifically:
Not much going on aside from a spike in late-July 2015.
When you search the USA specifically:
Not much going on either except in those specific 5 states in the US.
Now, when you search for this term in Canada…
There is definitely an upward trend forming since late-2015. And the term is searched for specifically in the hottest real estate markets in Canada – Ontario and British Columbia – as well as the province hit hardest by the collapse in oil prices, Alberta.
Ok, so I think to myself “this is interesting” – what if the search term was “declaring bankruptcy”?
Not much going on, except for the usual suspects in the “Interest by Region” column.
When you search the UK specifically for this term:
While steady, the projected increase is interesting.
When you search the US specifically:
Steady again with a projected increase.
Now, when you search for this term specifically in Canada:
Again, there is more of a trend upwards. And again, the strongest subregions of interest are the two hottest real estate markets and the province most heavily reliant on oil prices.
Real Estate Bubble
I happen to be of the opinion that Canada is currently and has been for some time, in a real estate bubble.
Here is the trend for the search term “real estate bubble” worldwide:
Steady with no clear trend.
The search term specifically in the UK:
Steady with no clear trend.
The search term specifically in the US:
Steady however with some interest strength in certain subregions.
Now, when you punch in “real estate bubble” for Canada:
There definitely is an upward increase of that search term being used by Canadians, with interest, again, coming from the 3 main suspects.
So what does this all mean? I think it’s interesting circumstantial evidence of Canada’s real estate bubble.
Real estate prices have reached silly levels, primarily in Ontario and BC, that are far removed from historic norms. The average and median wages relative to the average and median prices of homes in regions such as Ontario and BC are far removed from history.
What once cost $200,000 to $300,000 for your average home (adjusted for inflation in today’s dollars) now costs 3 to 4 times that amount (in today’s dollars). Real shit shacks are going for insane amounts in Vancouver.
Seeing as real wages haven’t really grown much since 1981, buying real estate at these elevated levels can only be achieved by massive borrowing. And massive borrowing is what has been going on with interest rates so low for so long.
However, interest rates are now on the way up. There was a 0.25% increase in July. There is another 0.25% increase planned for the fall. And then more planned for 2018. The cost of borrowing is going up. Massive mortgages that were taken out at the lowest rates in history will be higher when renewal time comes.
The interest rate hikes that are beginning will be the catalyst that pops the bubble. Like every cycle, this one is coming to an end.
The rising trend in these search terms point to the stress fractures that are appearing in Canada from a bubble that has been blown to epic proportions.