Vancouver has one of the bubbliest property markets in the world (Glaciertim/Flickr)
Vancouver has one of the bubbliest property markets in the world (Glaciertim/Flickr)

They're the six most dangerous words in the English language, but here they are anyway: maybe this time really is different.

Every bubble begins as a boom, but not every boom becomes a bubble—only the ones that go bust do. The trick is figuring out which booms have gotten so vertiginous that a bust is almost inevitable. That is, calculating where prices have gotten so unmoored from the fundamentals that, like all things that can't go on forever, it will eventually stop—and correct.

Global Housing Prices.jpg

The IMF has tried to do just that with its latest report on global housing prices. And, as you can see in the chart below, Canada, New Zealand, and Norway's housing markets are all looking seriously frothy, with price-to-rent ratios between 86 and 66 percent above their historic averages.

The countries with the most overvalued housing markets today are the ones that, for the most part, 1) didn't have to cut interest rates to zero during the crisis, 2) have significant supply constraints, and 3) are magnets for foreign buyers.

In other words, these countries' central banks were able to fight the Great Recession on their own, which kept unemployment from rising too much and, consequently, housing prices from falling much either. But, especially in geographically-constrained places like New Zealand and Norway, there are only so many places you can build—so it's easy for demand to outstrip supply. Especially when, as James Surowieki points out, rich Chinese (and Russians and Arabs, etc.) are eager to buy up foreign properties as either vacation spots or insurance against unrest back home.

How long can it last? Who knows. But take a look at Japan. It's been over 20 years, but its property market still hasn't recovered from its epic boom and bust in the late 1980s.

To paraphrase Keynes, prices can remain irrational—up or down—longer than you can possibly imagine.