Another day, another group of international investors circling around the profits to be made when the Canadian debt bubble bursts. Polar opposite to the poor mom and pops who have been herded into Canadian equity, corporate debt and real estate markets the past few years by their risk-selling financial gurus. So called ‘smart money’ contrarians are betting that this time isn’t different, and that crazy valuations will mean revert once more. See: U.S. short sellers betting on Canadian housing crash, “an accident waiting to happen”.
The hedge fund investors, known as short sellers, are betting against what they believe is a housing bubble in Vancouver, Toronto, Calgary and other Canadian cities. They believe Canadians hold too much mortgage debt, and that Canadian banks, mortgage insurers and “subprime” private lenders will lose money on unpaid loans when property prices fall.
“The cross currents are beyond crazy in Vancouver — it’s a mix of money laundering, speculation, low interest rates,” said Marc Cohodes, once called Wall Street’s highest-profile short-seller by The New York Times. “A house is something you live in, but in Vancouver you guys are trading them like the penny stocks on Howe Street.”
He says Vancouver real estate has reached peak insanity, and any number of factors could trigger a collapse.
Local real estate professionals predicted the U.S. investors are likely to lose their shirts betting against Vancouver property, which they described as a special market thriving on international demand.
[Translation: realtors not surprisingly say, ‘this area is different’.]