From shuttered stores and offices to surging unpaid rents, US landlords have suffered a body blow this year. And there’s more turbulence ahead, from short-term cash shortfalls to big changes in tenant preferences.
But American property is hardly down for the count. Thanks to the combination of record government fiscal and monetary stimulus and gradual reopening of public spaces, signs of a turnaround are emerging. And that means opportunity to bet on a comeback in selected real estate investment trusts, many of which are down more than 50 percent year-to-date.
It’s likely most investors will look to REIT-focused ETFs to place wagers. And with roughly $3.2 billion in total assets, the iShares US Real Estate ETF (IYR) will attract its share of the money.
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Trading more than 8 million units a day over the past year, iShares REIT is certainly liquid. The Dow Jones US Real Estate Total Return Index it tracks is well diversified with some 113 REITs. And at the current price, the ETF is roughly 20 percent below the all-time set on February 19, leaving room for upside.
There’s just one problem: Despite its name, the Dow Jones US Real Estate Total Return Index is actually a very poor trackers of US property’s fortunes. And that means the iShares ETF is a surprisingly poor way to bet on a recovery.
Let’s start with the fact that not one of the index’s eight largest holdings actually owns office, retail or residential property. Rather, the biggest residential REIT AvalonBay Communities (AVB) doesn’t show up until number nine at roughly 2 percent of the portfolio.
The biggest retail property owner Simon Property (SPG) doesn’t come in until eleventh. And the largest office REIT is Boston Properties (BXP) in 20th place.
Five of the six largest holdings are best described as telecom and Internet infrastructure owners. The biggest and weighing in at more than 10 percent of the portfolio is American Tower Corp (AMT). It’s actually best described as a multinational operator, since nearly half revenue is earned outside the US including emerging markets like Brazil and India.
American Tower has been a very successful company. And the fact management raised the quarterly dividend three times already this year is a pretty clear sign Covid-19 fallout hasn’t had much negative impact on its business to date.
But with American Tower’s shares hitting an all-time high earlier this month, the company clearly has its own internal dynamics and challenges including exchange rate volatility. And they have little or nothing to do with the impact of pandemic control measures on US property markets.
The same is true of the REIT index’ other top 8 holdings, which together make up more than 40 percent of the total portfolio. In fact, these REITs really only have one thing in common with the likes of AvalonBay and Simon: That’s a corporate structure requiring the payout of the lion’s share of earnings in dividend distributions every year.
So far this year, iShares US Real Estate ETF returns have clearly benefitted greatly from holding such a heavy weighting of companies not affected by Covid-19 fallout. For example, Simon is more than 50 percent below where it began 2020. Boston Properties is lower by 30 percent and AvalonBay is off by nearly 25 percent.
This trio rates among the largest and financially strongest REITs in their respective sectors. So, damage has been even worse down the line, including steep distribution cuts across multiple property sectors. But iShares REIT, in stark contrast, has held its year to date losses to only around 7 percent including dividends.
So long as wireless tower and data infrastructure stocks outperform, the iShares ETF will benefit. But the fact their heavy presence dilutes whatever is happening to owners of office buildings, retail centers and residential properties is a double-edged sword. Mainly, they’ll also strongly dilute the favorable impact of a US real estate recovery.
That makes iShares REIT a poor way to bet on property now. And the same is true for the Real Estate Select Sector SPDR Fund (XLRE), which tracks the Real Estate Sector Total Return Index. That ETF is down just 7 percent this year, thanks in part to holding 15.6 percent in American Tower.
Its eighth largest holding AvalonBay Communities is a slightly bigger piece at 3 percent than it is for iShares. But the SPDR Fund is even more top heavy with 56 percent in its seven biggest positions, none of which are residential, office or retail REITs.
That leaves individual REITs as investors’ best property recovery bets, though selectivity is crucial. This month’s canvas of the 70 plus companies in our REIT Sheet coverage universe shows the best in class are weathering this storm. But many others are struggling to keep heads above water.
The steepest plunge has been in retail, where the widespread mall closings have forced once-major companies like J.C. Penny (JCPNQ) into bankruptcy. Shopping center REITs overall reported receiving less than half of scheduled rents in April and May due to tenants’ financial distress.
The best-run owners of office property have collected upwards of 90 percent of rents on time, thanks largely to long-term contracts with committed tenants. But others face a day of reckoning, particularly REITs with tenants in the battered oil and gas industry. And even multi-family residential REITs have reported greater strain than they did in 2008-09.
For REITs, there’s no substitute for strong balance sheets, low cost capital, high quality properties and creditworthy tenants. Those with them are gearing up for growth as once-stratospheric asset values fall to earth. Those that don’t are cutting dividends and worse.
Bottom line: There’s rarely been a better time to buy best in class REITs for high yield and ultimately explosive capital gains, but only if you’re willing to separate wheat from chaff. Anyone who’s not, simply shouldn’t bet.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
MONTREAL – The Quebec Professional Association of Real Estate Brokers says Montreal-area home sales rose 9.3 per cent in August compared with the same month last year, with levels slightly higher than the historical average for this time of year.
The association says home sales in the region totalled 2,991 for the month, up from 2,737 in August 2023.
The median price for all housing types was up year-over-year, led by a six per cent increase for the price of a plex at $763,000 last month.
The median price for a single-family home rose 5.2 per cent to $590,000 and the median price for a condominium rose 4.4 per cent to $407,100.
QPAREB market analysis director Charles Brant says the strength of the Montreal resale market contrasts with declines in many other Canadian cities struggling with higher levels of household debt, lower savings and diminishing purchasing power.
Active listings for August jumped 18 per cent compared with a year earlier to 17,200, while new listings rose 1.7 per cent to 4,840.
This report by The Canadian Press was first published Sept. 6, 2024.
In the quest to find cities where renters can enjoy the best of all worlds, a recent study analyzed 24 metrics across three key categories—Housing & Economy, Quality of Life, and Community. The study ranked the 100 largest cities in Canada to determine which ones offer the most to their renters.
Here are the top 10 cities that emerged as the best for renters in 2024:
St. John’s, NL
St. John’s, Newfoundland and Labrador, stand out as the top city for renters in Canada for 2024. Known for its vibrant cultural scene, stunning natural beauty, and welcoming community, St. John’s offers an exceptional quality of life. The city boasts affordable housing, a robust economy, and low unemployment rates, making it an attractive option for those seeking a balanced and enriching living experience. Its rich history, picturesque harbour, and dynamic arts scene further enhance its appeal, ensuring that renters can enjoy both comfort and excitement in this charming coastal city.
Sherbrooke, QC
Sherbrooke, Quebec, emerges as a leading city for renters in Canada for 2024, offering a blend of affordability and quality of life. Nestled in the heart of the Eastern Townships, Sherbrooke is known for its picturesque landscapes, vibrant cultural scene, and strong community spirit. The city provides affordable rental options, low living costs, and a thriving local economy, making it an ideal destination for those seeking both comfort and economic stability. With its rich history, numerous parks, and dynamic arts and education sectors, Sherbrooke presents an inviting environment for renters looking for a well-rounded lifestyle.
Québec City, QC
Québec City, the capital of Quebec, stands out as a premier destination for renters in Canada for 2024. Known for its rich history, stunning architecture, and vibrant cultural heritage, this city offers an exceptional quality of life. Renters benefit from affordable housing, excellent public services, and a robust economy. The city’s charming streets, historic sites, and diverse culinary scene provide a unique living experience. With top-notch education institutions, numerous parks, and a strong sense of community, Québec City is an ideal choice for those seeking a dynamic and fulfilling lifestyle.
Trois-Rivières, QC
Trois-Rivières, nestled between Montreal and Quebec City, emerges as a top choice for renters in Canada. This historic city, known for its picturesque riverside views and rich cultural scene, offers an appealing blend of affordability and quality of life. Renters in Trois-Rivières enjoy reasonable housing costs, a low unemployment rate, and a vibrant community atmosphere. The city’s well-preserved historic sites, bustling arts community, and excellent educational institutions make it an attractive destination for those seeking a balanced and enriching lifestyle.
Saguenay, QC
Saguenay, located in the stunning Saguenay–Lac-Saint-Jean region of Quebec, is a prime destination for renters seeking affordable living amidst breathtaking natural beauty. Known for its picturesque fjords and vibrant cultural scene, Saguenay offers residents a high quality of life with lower housing costs compared to major urban centers. The city boasts a strong sense of community, excellent recreational opportunities, and a growing economy. For those looking to combine affordability with a rich cultural and natural environment, Saguenay stands out as an ideal choice.
Granby, QC
Granby, nestled in the heart of Quebec’s Eastern Townships, offers renters a delightful blend of small-town charm and ample opportunities. Known for its beautiful parks, vibrant cultural scene, and family-friendly environment, Granby provides an exceptional quality of life. The city’s affordable housing market and strong sense of community make it an attractive option for those seeking a peaceful yet dynamic place to live. With its renowned zoo, bustling downtown, and numerous outdoor activities, Granby is a hidden gem that caters to a diverse range of lifestyles.
Fredericton, NB
Fredericton, the capital city of New Brunswick, offers renters a harmonious blend of historical charm and modern amenities. Known for its vibrant arts scene, beautiful riverfront, and welcoming community, Fredericton provides an excellent quality of life. The city boasts affordable housing options, scenic parks, and a strong educational presence with institutions like the University of New Brunswick. Its rich cultural heritage, coupled with a thriving local economy, makes Fredericton an attractive destination for those seeking a balanced and fulfilling lifestyle.
Saint John, NB
Saint John, New Brunswick’s largest city, is a coastal gem known for its stunning waterfront and rich heritage. Nestled on the Bay of Fundy, it offers renters an affordable cost of living with a unique blend of historic architecture and modern conveniences. The city’s vibrant uptown area is bustling with shops, restaurants, and cultural attractions, while its scenic parks and outdoor spaces provide ample opportunities for recreation. Saint John’s strong sense of community and economic growth make it an inviting place for those looking to enjoy both urban and natural beauty.
Saint-Hyacinthe, QC
Saint-Hyacinthe, located in the Montérégie region of Quebec, is a vibrant city known for its strong agricultural roots and innovative spirit. Often referred to as the “Agricultural Technopolis,” it is home to numerous research centers and educational institutions. Renters in Saint-Hyacinthe benefit from a high quality of life with access to excellent local amenities, including parks, cultural events, and a thriving local food scene. The city’s affordable housing and close-knit community atmosphere make it an attractive option for those seeking a balanced and enriching lifestyle.
Lévis, QC
Lévis, located on the southern shore of the St. Lawrence River across from Quebec City, offers a unique blend of historical charm and modern conveniences. Known for its picturesque views and well-preserved heritage sites, Lévis is a city where history meets contemporary living. Residents enjoy a high quality of life with excellent public services, green spaces, and cultural activities. The city’s affordable housing options and strong sense of community make it a desirable place for renters looking for both tranquility and easy access to urban amenities.
This category looked at factors such as average rent, housing costs, rental availability, and unemployment rates. Québec stood out with 10 cities ranking at the top, demonstrating strong economic stability and affordable housing options, which are critical for renters looking for cost-effective living conditions.
Québec again led the pack in this category, with five cities in the top 10. Ontario followed closely with three cities. British Columbia excelled in walkability, with four cities achieving the highest walk scores, while Caledon topped the list for its extensive green spaces. These factors contribute significantly to the overall quality of life, making these cities attractive for renters.
Victoria, BC, emerged as the leader in this category due to its rich array of restaurants, museums, and educational institutions, offering a vibrant community life. St. John’s, NL, and Vancouver, BC, also ranked highly. Québec City, QC, and Lévis, QC, scored the highest in life satisfaction, reflecting a strong sense of community and well-being. Additionally, Saskatoon, SK, and Oshawa, ON, were noted for having residents with lower stress levels.
For a comprehensive view of the rankings and detailed interactive visuals, you can visit the full study by Point2Homes.
While no city can provide a perfect living experience for every renter, the cities highlighted in this study come remarkably close by excelling in key areas such as housing affordability, quality of life, and community engagement. These findings offer valuable insights for renters seeking the best places to live in Canada in 2024.
