Warren Buffett may have thrown a lifeline to embattled Canadian alternative lender Home Capital Group Inc, but that does not mean he is 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 published on Saturday of an interview on June 22 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 (US$301 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 last month; in Vancouver, prices have risen 115 percent to C$1.1 million in the same period.
The investment does not reflect an assessment of whether those will go up or down, Buffett said, “I do not know that.”
Berkshire Hathaway has confidence in Home Capital’s board and does not plan to exit its investment quickly, Buffett said.
“We’re not buying it to resell in four months or next year, or anything of the sort,” he said.
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