A New York-based strategist claims Canada’s housing market today is similar to the U.S.’ five years ago, when it was “basically unsustainable”.
Alessio de Longis of Oppenheimer Holdings Inc. said the Canadian dollar can still drop further as speculators pushed wagers against the currency to the highest in a year last week. He added that Canada reported record consumer debts and the price for crude oil dipped to a six-year low.
De Longis added that oil’s collapse will force the Bank of Canada to drop rates to as low as zero, “adding fuel to a housing market the central bank itself has already said is as much as 30% overvalued.”
“The housing market in Canada today is pretty much where the U.S. was five years ago,” he said in an interview. “It’s basically unsustainable, just like the U.S. market was.”
De Longis also shares the sentiment of the International Monetary Fund about the vulnerabilities of Canadian housing earlier this month, including the rise in risker uninsured mortgages among Australian borrowers.
“These lenders are picking up the marginal borrowers, or the borrowers who get turned down by banks.” said the report. “These types of leveraged balance sheets don’t leave much room for error.”
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