Deutsche Bank Cuts Bonuses by 60% AND says Cdn Realty Overvalued by same % – Oh My … can both be true?

A few Canadian news feeds have re-blasted this (sensational) headline:

Deutsche Bank bonuses cut by 60% | Business | The Guardian

Oh sorry not that one, this one

A Worldwide Ranking of the Most Over and Undervalued Housing

6:04 am
Dec 11, 2013

The Wall Street Journal By MICHAEL J. CASEY

It’s perhaps hard for anyone who owned property in the U.S. before 2007 to believe, but housing prices in many parts of the world never really went through a proper adjustment and have continued to climb to new heights.

According to analysis by Deutsche BankDBK.XE -0.93% economists, that’s left some property markets well and truly in overvalued territory. Based on their analysis, anyone in the market for property might want to avoid Toronto or Vancouver. On the other hand, if you can get around Japan’s restrictions on foreign investment, an apartment in Tokyo looks like a steal.

The work by DeutscheDPB.XE -0.12% economists Peter Hooper, Torsten Slok and Matthew Luzzetti ranks different countries’ housing markets according to an average of two ratios: home prices to income and home prices to rent. Those metrics are calculated for each country on the basis of how far or below they are from their historical norms and then combined with equal weights to come up with an overall estimate of over- or undervaluation.

Which prompted me to say:

  • robert edeThursday, 12 December 2013 07:31 posted by robert edeRidiculous! I’d say the share price of Deutsch Bank was 60% overvalued, based on the same out-of-date type of X “average” metric vis a vis Y “average” metric, that was taught in first year economics.
  • Canada’s population is divided by Statscan into quintiles. The bottom 2 quintiles are virtually wards of the state and will never buy a home. Average income of all quintiles is useless as a benchmark.
  • Second, price to rent is also obsolete. The inventory of purpose-built apts is 40-50 yrs old w no air/ no laundry and no pizzaz, compared to the swish new condo buildings.
  • All the new-grad households are renting downtown in these swish, meet-market high rises. And paying huge rents, thus supporting the investor-owner and forestalling the “bust” that was widely, albeit incorrectly, predicted (even by me)

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