Prem Watsa, CEO of Fairfax Financial Holdings Ltd. (TSE:FFH), is worried that Canad is headed for a US style property crash. The mogul correctly predicted the crash that has depressed the housing market in the United States since 2008 and is now suggesting something similar is happening in Canada. Watsa made the comments while speaking speaking at a meeting with investors in Toronto. The statements were rported by Bloomberg’s David Scheer and David Scanlan last week.
Carlson Capital's Black Diamond Arbitrage fund is up 5.77% for the first eight months of the year, including a 1.72% return for August. Last year, the fund returned 2.39% for the whole year. Q3 2021 hedge fund letters, conferences and more The fund consists of merger arbitrage mainly consisting of signed or "rate of return" Read More
Watsa was exact and foreboding in his comment “I just know that whenever you have a bubble most people think it’s going up”. Comments like that should shake investors into staying away from the country’s property market even as values skyrocket. Bloomberg reports that in the past decade values of property in large Canadian cities, notably Vancouver and Toronto, have tripled. The bubble appears to be concentrated on office and commercial growth rather than residential property. This is the central area in which it differs from the bubble in the United States where the 2008 bubble largely effected home sellers.
He is not the first to spot the trend in Canada and he is certainly not the first to worry about the implications it has for the country. The web site Canadabubble.com is entirely devoted to news about the country’s housing market and its possibly huge over valuation. Despite the worries MSNBC yesterday posted an article of the world’s hottest property markets citing Canada as number seven on the list tied with Norway. The article called the country’s real estate market robust citing its survival of the 2008 crash. The article placed China, another country with worries of a bubble, at number one on the list.
Canada managed to escape the deepest of the negative effects resulting from the 2008 crash due to a stable banking sector and a healthy commodity market. That does not mean the country won’t be drastically effected by a crisis in its property market if one were to appear. Watsa is right to be nervous of the future of the market. Today it was reported by the Wall Street Journal that the country’s regulators would be taking a closer look at HELOCs, a controversial credit practice favored by many of the country’s banks.
Watsa also spoke about his investment in Research in Motion (NASDAQ:RIMM) (TSE:RIM) at the meeting. He predicts that the company, which has seen greater and greater trouble mounting in recent months, will see a turn around in the next three to five years. Fairfax’s large investment in the company has been the source of much angst, even as Watsa himself joined the board and continued delivering statements confident about the company’s future.