Investors are Calling Short on Canada’s Housing Market

Many investors are looking at Canada's property market with a more pessimistic view as the slump in energy prices continues to dampen economic growth.

Real estate investors are calling "short" on their investments with banks and insurance companies that have invested heavily in Canadian real estate. According to CNBC, one big reason is they expect prices of shares to be dropping down which is a valid concern especially in the wake of low interest rates. Interest has been cut down twice for 2015 and is now at 0.5 percent. Among the top 10 stocks that got shorted, three of them belong to financing groups.

The number one shorted stock in Canada belongs to Home Capital Group, one of the country's biggest financial companies. Home Capital just recently experienced an 18 percent sell-off of shares with its borrowing cost of shares jumping to 10 percent with lesser number of mortgages recorded in the second quarter of the year. The number of shares that are currently on loan is now 31.9 percent.

Canadian Western Bank follows closely with 54 percent of its $19 billion investment portfolio locked in on real estate, loans and mortgages. An additional 27.7 percent of the company's shares are placed on loans which is why it ranks fourth in the list of most shorted stock of Canada.

Meanwhile, according to Huffington Post, the Canada Mortgage and Housing Corp. or CMHC reported that it has discovered overvaluation in 11 housing markets plus a slew of other concerns in Toronto, Winnipeg, Saskatoon, and Regina. The report from CMHC explains that the speed up in the increase of housing prices and overvaluation could lead to economic problems in Toronto. This behavior of the property market usually happens when prices go up without support from basic economic drivers like income and number of people who actually buy.