PODCAST: How Bank Failures Could Impact Canadian Real Estate
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How could the recent demise of Silicon Valley Bank (SVB) impact the real estate market?
In episode 72 of the Real Estate Investor podcast, hosts Daniel Foch and Nick Hill explore the implications of the demise of SVB and Signature Bank and whether smaller financial institutions in Canada could suffer similar fates.
The hosts analyze SVB's impact on the real estate industry, as about 15 percent of the loans on its books were secured by residential mortgages and commercial real estate.
While SVB's fall may not significantly impact the borrower as the lender changes hands, it could cause a perception of systemic U.S. banks' risk and impact the valuations of venture capital startups with millions at SVB.
The pair also discuss how SVB's collapse marks the second-biggest bank failure in U.S. history and the largest since the 2008 financial crisis. Foch and Hill touch on other headlines out of California that suggest it could emerge as a ground zero for a U.S. real estate blowoff.
Foch and Hill also explore SVB's commercial real estate exposure and the higher risk of default compared to other types of loans, given the uncertainty around the economy and residual effects of the pandemic on retail, hotels, and offices.