Hedge Funds Betting On A Canadian Real Estate Bubble

New York (HedgeCo.net) – The hedge funds that made ridiculous returns by betting on the U.S. housing market implosion in 2007 have now selected their next target. These hedge funds are now betting on a similar implosion in Canada and in particular Vancouver.

The foundation for the bearish bets are founded on a belief that Canadians have too much mortgage debt and when prices fall, banks, lenders and mortgage insurers will suffer.
In an interview with Toronto newspaper The National Post, Marc Cohodes stated that “The cross currents are beyond crazy in Vancouver — it’s a mix of money laundering, speculation, low interest rates. A house is something you live in, but in Vancouver you guys are trading them like the penny stocks on Howe Street.”

One interesting thing about the Vancouver market is the demand from international investors and China in particular. As the stock market in China has soared, this may be contributing to an inflow into the Vancouver market, but what happens if China’s economy continues to slow and the stock market goes through a correction?

Some believe that if the stock market in China slows, Chinese investors will use real estate in Vancouver as an alternative investment while others believe that if China’s economy continues to slow, the demand for Canadian real estate will falter.

Rick Pendergraft
Research Analyst

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