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Is Canadian Housing the Worst Investment to Make Right Now? – The Motley Fool Canada

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Homeownership is the dream of every Canadian. The country’s housing market is vibrant but hasn’t been too friendly to first-time buyers, especially in preferred cities like Toronto and Vancouver. Both cities are notorious for high real estate prices.

When COVID-19 hit town, many predicted that housing prices would fall drastically. Despite the high unemployment and deteriorating economy, realtors and brokers say activities are not slowing down.

August was supposed to be a lean, yet it was the busiest month in 2020, with house prices rose by 18%. It appears Canadians are looking for bigger homes to be comfortable during lockdowns. If the housing market is surging amid the pandemic, is it worth investing today?

Real estate bubble index

The UBS’ Global Real Estate Index 2020 reveals that home values worldwide are rising despite the coronavirus-induced global recession.  Based on the analysis of 25 major cities, 50% are overvalued or at risk of a housing bubble.

The index looks for usual signs such as imbalances in the real economy (i.e., construction activity, excessive lending). It could also be a disconnect of prices from local incomes and rent.

The top two cities with elevated risk are Munich and Frankfurt in Germany. Hong Kong and Paris rank fourth and fifth. Interestingly, Toronto in Canada is in the third spot. It’s the only city in North America that is at risk of a housing bubble. The markets in Vancouver could overheat, but a crash is unlikely.

A housing crash

The housing market is humming after the lifting of lockdowns. However, there are more buyers than inventory. With CERB and mortgage deferrals ending, some people may need to sell due to financial constraints.

If you intend to purchase or invest, delay it first and wait for the prices to drop. The Canada Mortgage and Housing Corp. (CMHC) warns that average prices would fall between 9% and 18% from pre-pandemic levels before beginning to recover in the first half of 2021. The federal housing agency is saying a crash is coming.

Today, the best investment alternatives, while the real estate market is fragile, are real estate investment trusts (REITs), specifically industrial REITs. Summit Industrial (TSX:SMU.UN) is highly recommended as it has been displaying resiliency during the pandemic. The REIT can ride out a market crash too.

This $1.98 billion REIT is outperforming the TSX (+10.9% versus -3.32%) year-to-date. Summit pays a respectable 4.16% dividend. Assuming you have a budget of $300,000, you can generate a passive income of $12,480 ($1,040 per month). You can be a lazy landlord and do away with insurance, maintenance, and other ownership-related costs.

The unique competitive advantage of Summit is its portfolio of industrial properties. Each property is highly marketable because the utilization is generic. It can be a warehouse, storage facility, light assembly plant, or call centre. For the REIT, market rent volatility and operating costs are low. You can be a lazy landlord through Summit.

Affordability

The low interest rate environment is conducive to borrowing. However, if home prices increase and outpace people’s income, there could be fewer buyers who can afford to purchase.

Speaking if it’s a good time to invest in Canada’s housing market…

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Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends SUMMIT INDUSTRIAL INCOME REIT.

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S&P/TSX composite up more than 100 points, U.S. stock markets mixed

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TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.

The S&P/TSX composite index was up 103.40 points at 24,542.48.

In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.

The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.

The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.

The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.

This report by The Canadian Press was first published Oct. 16, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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S&P/TSX up more than 200 points, U.S. markets also higher

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TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.

The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.

The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.

This report by The Canadian Press was first published Oct. 11, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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S&P/TSX composite little changed in late-morning trading, U.S. stock markets down

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TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.

The S&P/TSX composite index was up 0.05 of a point at 24,224.95.

In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.

The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.

The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.

The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.

This report by The Canadian Press was first published Oct. 10, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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