According to this report from Oxford Economics https://betterdwelling.com/canadian...ted-to-drop-24-can-crash-40-oxford-economics/, the Canadian real estate is expected to have a 24% price drop by 2024 and with inflation, the negative returns would persist until 2030. So if I were you and really want to do something with this, I would wait at least after 2024 to invest in Canadian real estate. Or if you really believe Oxford Economics' prediction, you can short real estate ETF's or residential REITS. Or you can buy puts on Canadian real estate companies that own real estate agencies and etc. until 2030 and then close your shorts then. In the long run, I believe the price drop is transient.
Agree overall. But the current pricing looks way overdone. I honestly can't see buyers more stretched than now. Can absolute values exceed even current price levels after a 20 or 30% correction? Yes, but only if bread and potatoes cost a few thousands per pound. Canada does not have as productive an economy as the US does. Not unless something fundamentally changes in Canada. As of today agriculturals, minerals, mining, forestry, and real estate markets hold a firm grip on the economy and neither the government nor its people appear capable of changing course. That means incomes inflation adjusted won't grow much in the future. That's how I see it.
Look at this way: the real estate market grew and became even more overheated even during the pandemic when the economy shrunk and everybody lost their job and supposedly couldn't even pay their mortgage. Imagine if the economy re-opens fully and everybody got their job back. Even with the increased interest rate, the mortgage rate is still cheap so people will still be scrambling to buy real estate while the rate is still low if the central bank of Canada, just like the Fed, is going to keep on increasing the interest rate. Unless Canada one day becomes Yemen or Sudan (no offense to either of these countries; they are beautiful countries with beautiful cultures), the real estate property values will always be going up provided of course you hold it for a long term. Everybody, as soon as they have some money would want to own a property instead of renting forever. When you are young and single and are having fun, maybe, but as soon as you settle down and especially when you have kids, you will want to own your own property. Renting is just not the same. From a financial point of view, renting is only worth it if you really can make more money investing than how much you are putting on rent that increases every year. Canada is not like China where you buy one property and by next month, its value has already appreciated by like 50%, that no, but if you invest and hold, you will always earn a positive return that's almost guaranteed just like the SPX, nobody thought it could reach 4000 even during a freaking pandemic, and look at it now. And I am sure at one point in history, nobody ever thought it could go past 1000.
Shorting housing has been hard because there’s no way to borrow a house and short it and then buy it back at a lower price. however someone has already given the playbook on how to do it. Someone who swings billions of notional in FX (among other trading strategies) should be buying CDS on mortgage backed securities. The repackaging of loans hasn’t stopped at all.
If I could still engage in the OTC this question would have never arisen....my options now are much more limited...
I can only speak about real estate in Toronto. Any drops at this point are really pull backs because recent price gains were quite sharp in certain segments. The overall market is bullish until at least year 2050 ( I posted this in 2010 ). Now that there is far more work at home and unemployment is at record lows now ( thanks to the local IT boom ), values are strongly underpinned. If someone wants to short something, there is a world of better things to short. Those who choose to short quality assets or stocks are making an emotional look at me I'm so smart play. They will rarely succeed longer term with that approach. Inflation may create a short term drop but there will be no huge spike in foreclosures or lack of demand here. I believe inflation will settle faster then most on here think anyways.
Unemployment is already at close to record lows. Toronto had the largest creation of new IT jobs in NA in one very recent 5 year period ( higher then the next 3 largest gains combined ). There are still major companies setting up new offices here ( Facebook announced a significant new project last week ). Toronto is attractive because of the wealth of young professionals and the salaries are cheaper here then say California. While one could argue that is a short term issue, in fact for real estate it's a big plus because you get a lot of young two professional families that see a lot of pluses to raising a family here. Young people and many day traders have no real perspective on longer term assets. I sold my TD and BMO stock in the 1990s because I lacked the patience to wait. One recent study showed that from 1995 to 2019 holding TD stock reinvesting dividends paid 2500% return. TD has now broken those 2019 highs up another 33% since. But what I did do was own a home a modest home I could afford comfortably and pay off ( which was completed I believe 2010 ). The fact it's up around 450% in value almost doesn't matter, but it's a nice windfall that is completely tax free in Canada if you sell it. "M.W." is back on block they have almost zero understanding of Canada and their description of our economy is comical. Toronto is NOT a farming, mining, or fishing community. Not even close. My opinion this is not a trading thread it's a troll on Canada the title is long and set to attract attention.
We can look back to 2010/2011 and note that some of the more popular themes were short SPX, short Canadian real estate, short AAPL, etc etc. There is something about many traders that they think whatever goes up must come down, and it's simply not true. Pullbacks can happen but when there a multitude of people looking for a window to get in such moves will rarely last. In any event traders are free to pursue whatever they fancy but you won't hear about it if they lose money.