Buffett Bullish on Canada But Not as Much on Its Housing: GlobeBy
Legendary investor expresses concern about home price run-up
No plans to quickly exit investment in lender Home Capital
Warren Buffett may have thrown a lifeline to embattled Canadian alternative lender Home Capital Group Inc., but that doesn’t mean he’s as enthused about the nation’s soaring housing markets.
“I’m bullish on Canada,” Buffett said, according to a transcript Toronto’s Globe and Mail newspaper published Saturday of a June 22 interview with the legendary investor. “Being bullish on a country doesn’t automatically make you bullish on the housing market.”
On June 21, Buffett’s Berkshire Hathaway Inc. agreed to take a 38 percent stake in Home Capital for about C$400 million ($302 million) and provide a line of credit. The Canadian company’s stock has risen more than 24 percent since then.
“Prices have gone up a lot, and if you’re lending money on housing, you’d rather not have it having gone up that much,” Buffett told the Globe. “You’ve got to be more careful, obviously, the higher prices get.”
Canada’s home-price escalation has been driven primarily by two cities. In Toronto, average home prices have soared 130 percent in the past decade, reaching C$863,910 in May. In Vancouver, prices have risen 115 percent to C$1.1 million in the same period. Buffett said the investment doesn’t reflect an assessment of whether those will go up or down. “I do not know that,” he said.
Buffett said Berkshire Hathaway has confidence in Home Capital’s board and doesn’t plan to exit its investment quickly. “We’re not buying it to resell in four months or next year or anything of the sort,” he said.