Warren Buffett Invests 400 Million in Canadian Real Estate
Warren Buffett invested 400M in Home Capital this summer in addition to providing them with a 2Billion dollar credit line.
This positive turn of events in the real estate market signals a few things that we should take note of. First of all, Warren Buffett is enthusiastic about Canada saying his investment "does reflect [a] belief on my part – I’m bullish on Canada…It wasn’t very long ago I actually was with your Prime Minister and Finance Minister out in Seattle, and we had a long talk. I always have been enthusiastic on Canada generally, but I felt even more so after talking to both of them."
While we of course know that Canada is the place to be, it's affirming to know that are sentiment is rooted more deeply than any of our personal biases.
This investment is a vote of confidence that Canada's economy is on a good path and that Canadians are poised for positive growth and ultimately continued ability to pay back our household debt.
With respect to the fundamentals of our real estate market, Buffet's investment is his bet that the market will continue to do well.
Canada's lending rules and regulations are rigorously monitored and prudent to begin with. While our household debt might high at 1.4 Trillion, cautious lending practices, low interest rates and a quickly growing economy keeps consumers from defaulting.
As the fastest growing G7 country with a stable governmentand financial institutions, along with a diverse cultural and safe communities, Canada is a global destination and poised for long-term growth.
It’s no surprise that value-investor Buffett is entering a market at 33% discount while simultaneously receiving 9% interest on any used portion of the credit line - - seems pretty good to me!
Negative media reports and doubtful sentiment have been swirling the real estate industry ever since the government imposed 16 rules to cool down the market. This piece of news helps us take a step back and look at the industry from a broader perspective, to realize that the fundamentals are still there and while the market might not beappreciating at 30% per year, stable and positive growth is in our future.