Recently just read an article from Macleans magazine arguing how the Canadian housing market has cooled down and is getting ready to contract. Real estate in Canada accounts for roughly 30% of the GDP as a whole. I'm really not going to argue against this because anyone who lives in either Toronto or Vancouver can vouch for how out of wack property prices truly are. If this "thesis" was to turn out to be correct, clearly there is an opportunity to profit. The question is (Specifically to all the Canadian WSOers) what is your weapon of choice if you were to line up for a short like this?
Or if you think this article/thesis on the Canadian housing market is complete horse shit, i'd love to hear your counter argument.
completely true. take Vancouver for example - prices have been bloated to the point where there are many properties being built, but not enough are sold/turn down to maintain this price.
I've lived in Vancouver for awhile, and yes, the property prices are insane (the city's boring as hell too). Real estate is currently not a good investment. Cap rates have historically been around 7.5%, while most property today has a cap rate of ~5%. If you buy an actual property as an investment, you'll most likely have a negative cash flow. I've also estimated that P/AFFO are about 20x for most apartment REITS, which is high in my books. I wouldn't short real estate, but I'd definitely wouldn't buy it either at the moment.
Rosenberg has written extensively on this over the last couple years. The issue becomes we have CMHC and all that crap, and Macleans should be the starting point compare it to "Time Magazine" i.e. if they calling 2013 the crash they probably way late to the party.
Anyways this leads to instead of "Big Short" instant crash to what we will see is a long time dwindle painful trend, how you trade that becomes much more difficult for sure possible, the risk/reward and time/knowledge needed may not be worth it. My favorite chart of Rosenberg's is comparing Toronto to Florida/Arizona time of their peak, it's for sure a bubble but it will not pop the same the US did either.
Also there is no thing as a foreclosure model in Canada like the US, the idea someone can just call the bank and say come pick up the keys "I am out" is totally unheard of us, do I think the CMHC rules/data is total BS and banks/realtors are curving around for sure, so neither extreme is correct the truth is somewhere in the middle.
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