Similar to Cohodes, Nick Rokke believes in a Canadian housing bubble that will be bursting momentarily. He references a lot of evidence in his argument, from the 50% price run-up Vancouver has seen over the past 3 years, its recent fall, and other similar situations in cities like Toronto. He rationalizes his belief of impending poppage by reminding readers that a housing market becomes unstable when the price of properties in relation to median income becomes too great. He also references the high ratio of household debt to disposable income.
Matt Smith talks about the recent increase in popularity of shorting banks in the Canadian Housing Market, such as TD, RBC, and Scotiabank. He describes these shorts as widow-maker trades, which are short sell trades on an overvalued asset that make sense intellectually but still continue to increase in value and open investors to higher and higher losses. Only last month, shorts against the Canadian housing market were evaluated to be in excess of $13 Billion US. Despite this popularity, Smith dismisses the possibility of a housing bubble in Canada, saying that the Market is actually quite cool, that there is far less sub-prime lending in Canada compared to the US before the crash, and that even if there was a housing crash, Banks are protected enough by their insurance so that they need not sell foreclosed properties quickly, meaning that a rapid depression of the housing market which was caused by this in the US would not happen in Canada.
Canada’s largest non-prime mortgage lender was the most shorted stock in the S&P/TSX composite index at the time this article was published, with more than 30 per cent of float sold short. Robert Gill, portfolio manager at Lincluden Investment, believed that this is the wrong move. Gill's argument, when this was published in late 2016, was that the Canadian market was not similar enough to the US one before the crash, any misinformation by mortgage brokers about client financial information would not affect the market, and that Home Capital's lending pool isn't actually as high risk as people say. Unfortunately for gill, the people shorting Home Capital Group did incredibly well, as the stock went from a price of around $38 in mid-2016 to a low of $5.85 in early May 2017.
Meet Marc Cohodes, the billion dollar hedge fund manager that came out of retirement to short the Vancouver and Toronto real estate markets. Some of the reasons he lists for wanting to short the market are the rising home prices, that indicate people are using homes and properties as an economic generator. If a home is evaluated monetarily as anything other than a place to live, you are in a housing bubble. In addition to this he references foreign money laundering (such as the influx of Chinese capital to Vancouver), and sub-prime lending that is coming from private lenders. In summary, Cohodes believes all of these factors indicate that the housing market in Canada, specifically in places like Toronto in Vancouver, are going to fall drastically in the future.