Analyst envisages Canadian housing crash

If Ben Rabidoux, a market analyst with Hanson Advisor, is to be believed, the housing boom in Canada will crash causing considerable collateral damage. Stating that the dissimilarities in the housing markets in the United States and Canada have been exaggerated considerably, he opined that it would be hard for the policy makers in Ottawa to slow this down smoothly.

In an interview to BNN, Rabidoux said when we consider industries related to housing as a GDP percentage, Canada is much higher compared to where the US maxed out. According to him the housing strength of Canada is not justifiable, particularly when compared to that in other economically advanced countries where realty markets have gone through double-digit sales as well price drops since the recession.

Rabidoux says that he works intimately with several leading financers and mortgage brokers and they agree that the mortgage scam is extensive. According to him, it is not easy to establish that people in Canada have accumulated their debts to the levels existing in the US. However, in Canada most mortgages have been given to sound borrowers.

In fact, Rabidoux's observation comes in the wake of information that the Hyphen Fund founder as well as portfolio manager Vijai Mohan has confessed that almost his total portfolio is all set to make profits from the housing market slump in Canada.

Mohan has also publicly stated that many banks have bought mortgage default insurance, but it is unlikely to hold because regulators examine the underwriting practices closely. Mohan described this as 'put-back' - a thing that came to be widespread after the US housing boom when several financers allegedly adopted fraudulent or immoral lending methods.

Mohan said that the problem regarding the transfer of risk in this case is subject to whether the mortgage loan was started in an appropriate as well as absolute manner. According to him, their research has revealed the 'put-back' risk, especially for financial institutions in Canada, on account of slip-ups in the collateral process.

Of late, the housing market in Canada has indicated failings, since the latest figures released by CMHC reveal that fresh housing projects have declined from 181,146 in March to 174,858 in April. The market reached the highest point (228,942) in 2012 second quarter, which is a long way from the April 2013 figures (174,858) - a decline of over 2.3 per cent.

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