The vultures who made a killing on the US housing debacle in the 2008 are now circling the Vancouver area. According to a report from nationalpost.com, these Wall Street investors are foreseeing that Canadian cities such as Vancouver and many like it would crash in the very near future.
These investors, known as short sellers are betting against the possibility of a housing bubble bursting in Vancouver, Toronto, Calgary and other major metropolitan areas. These hedge fund investors see Canadians have too much mortgage debt and financial institutions throughout Canada, from banks, to insurers and private lenders would go belly up when unpaid loans property prices start to fall.
According to one Canadian analyst, who sought anonymity because of client confidentiality, "All of the big global macro funds that were involved in betting against the US in 2007 and 2008 and 2009, they've studied Canadian housing for a few years."
He added, "I know a number of them are shorting Canadian housing. It looks like an accident waiting to happen."
In a report from huffingtonpost.ca, these short sellers are predicting that the downturn would begin to occur by the fall, which is also the time the US Federal Reserve would start raising interest rates, as predicted from previous actions of the Fed. In the increasing the US interest rates would put pressure on Canadian lending institutions, because fixed-rate mortgage rates in the Canadian market are related to the US bond rates.
It has also been observed that short sellers have been betting against big Canadian banks and their volume has more than doubled in the New York markets in the past few months. According to a report from thestarphoenix.com, the Bank of Canada has also identified the increased risk of a sharp housing correction connected to the big household debts Canadians have incurred since December of 2014. The outcomes predicted only a massive inflow of investment funds from China can stave off the bubble from bursting. Should the Chinese economy slow down though, the bubble would definitely burst and the consequences would reverberate throughout Canada.
