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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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Tesla shares soar more than 14% as Trump win is seen boosting Elon Musk’s electric vehicle company

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NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.

Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.

“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”

Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.

Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.

Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.

Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.

In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.

The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.

And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.

Tesla began selling the software, which is called “Full Self-Driving,” nine years ago. But there are doubts about its reliability.

The stock is now showing a 16.1% gain for the year after rising the past two days.

The Canadian Press. All rights reserved.

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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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