Canada markets closed
  • S&P/TSX

    +345.79 (+1.85%)
  • S&P 500

    +116.01 (+3.06%)
  • DOW

    +823.32 (+2.68%)

    +0.0062 (+0.81%)

    +2.79 (+2.68%)

    +131.35 (+0.48%)
  • CMC Crypto 200

    +8.22 (+1.81%)

    -1.70 (-0.09%)
  • RUSSELL 2000

    +54.06 (+3.16%)
  • 10-Yr Bond

    +0.0570 (+1.86%)

    +375.43 (+3.34%)

    -1.82 (-6.27%)
  • FTSE

    +188.36 (+2.68%)
  • NIKKEI 225

    +320.72 (+1.23%)

    +0.0040 (+0.55%)

Real Estate Prices Finally Soften: Buy These 2 REITs?

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·4 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

Written by Christopher Liew, CFA at The Motley Fool Canada

Is the softening of Canada’s supercharged housing market for real? The 12% decline in home resales between March and April seems to suggest that the rising interest rate is starting to weigh on home prices. The Bank of Canada will most likely announce the third installment of its rate-hike campaign on June 1, 2022.

Prospective homebuyers hope the market imbalance corrects soon to bring down home prices further. RBC Economics said the severe imbalance is easing. The bank notes that in some markets, the sales-to-new listings ratio reached balanced-market territory last month.

On the stock market, the real estate sector is the fourth worst performer after healthcare, technology, and consumer discretionary. However, if real estate prices continue to moderate, the sector would regain lost ground. Real estate investment trusts (REITs) like H&R (TSX:HR.UN) and Dream Office (TSX:D.UN) should be back on investors’ radars.

Repositioning plan

In Q1 2022, H&R reported declines in rentals from income properties (-24.23%) and net operating income (30.89%) versus Q1 2021. However, net income climbed 508.15% year over year to $970 million. This $3.88 billion REIT owns a high-quality real estate portfolio in North America. Office, industrial, residential, and retail properties comprise the portfolio.

Tom Hofstedter, H&R’s CEO, said, “Our strong first-quarter financial results mark a pivotal moment in the continuation of our transformation and the surfacing of the embedded value within our portfolio.” He added that the current portfolio today concentrates on higher growth asset classes. H&R has no more shopping centre division and also sold an office campus.

After the changes at the top, Hofstedter said that H&R is ready to execute its repositioning plan. Based on market analysts’ forecast, the upside potential in 12 months is 29.65%. This REIT trades at $13.22 per share and pays a 4.16% dividend.

Premier office landlord

Michael Copper, the CEO of Dream Office, said, “Our business has continued to navigate through uncertainties in the economy and recovery from the pandemic with resilience.” The $1.08 billion REIT is the premier office landlord in Toronto. While net rental income in Q1 2022 dropped 1.55% versus Q1 2021, net income increased 415.30% to $52.28 million.

Cooper said that the net income for the quarter includes the $25.9 million net rental income from Dream Industrial. Dream Office has investments in the REIT. As of March 31, 2022, the portfolio consists of 29 active properties and one under development.

Management anticipates more employees to return to offices during 2022. H&R’s leasing activity and traffic flow to its properties will materially improve net operating income. Parking revenues should also normalize. If you invest today, the share price is $23.08, while the dividend offer is 4.33%.

More supply and less competition

Real estate prices and housing demand might not be as elevated anymore after the central raises its key interest rate next month. Homebuyers look forward to a balanced market also where inventory or choices are more, but minus the competition or bidding wars.

Meanwhile, REITs are alternatives to buying physical revenue properties. You don’t need substantial cash to invest in H&R and Dream Office to generate rental-like income.

The post Real Estate Prices Finally Soften: Buy These 2 REITs? appeared first on The Motley Fool Canada.

Should You Invest $1,000 In Dream Office Real Estate Investment Trust?

Before you consider Dream Office Real Estate Investment Trust, we think you’ll want to hear this.

Our nearly S&P/TSX market doubling Stock Advisor Canada team just released their top 10 starter stocks for 2022 that we believe could be a springboard for any portfolio.

Want to see if Dream Office Real Estate Investment Trust made our list? Get started with Stock Advisor Canada today to receive all 10 of our starter stocks, a fully stocked treasure trove of industry reports, two brand-new stock recommendations every month, and much more.

See the 10 Stocks * Returns as of 4/14/22

More reading

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.


Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting