The Canadian housing market has long been one of the hottest areas for Canadian investors to enjoy meteoric returns on their investments. The last several years were full of speculation about a major housing market crash – something that never happened. The demand remains high in the residential real estate market without the supply to match.
As things heat up again in the real estate industry, it might be an excellent time to take advantage of the situation. The cash outlay to purchase investment properties is too high for many Canadians to consider. Investing in real estate investment trusts (REITs), however, could provide you with decent exposure to the performance of rising prices in the real estate market.
If you’re interested in dividend investing in stocks that offer monthly payouts, REITs could be a way to go. Today, I will discuss two REITs you could consider for monthly distributions and capital gains as the housing market heats up.
The scarcity caused by a plunge in the number of homes listed for sale in January saw a record monthly price gain. The country’s benchmark home price spiked by 2.9% month over month, the biggest monthly gain since 2005.
The Canadian Real Estate Association (CREA) reported that the new listings for homes on sale declined by 11%, and the number of sales rose by 1%. The ratio of sales to new listings surged to 89%, the second-highest spike on record. These factors are contributing to rising prices, and two REITs could help you leverage the trend to your advantage.
Canadian Apartment Properties REIT (TSX:CAR.UN) is one of the best REITs to consider for greater exposure to the Canadian housing market. The highly liquid exposure you get to the residential real estate industry could be reason enough to invest in CAPREIT. Additionally, the trust owns and operates a diversified portfolio of over 65,000 sites and suites across the country.
CAPREIT trades for $55.01 per share at writing, and it boasts a 2.35% dividend yield. The REIT has grown its investors’ capital at a compounded annual growth rate of 15% in the last five years. Investing in the REIT could be an excellent way to hedge your bets on the performance of the Canadian housing market.
Killam Apartment REIT (TSX:KMP.UN) is another excellent REIT to consider if you want to take advantage of the housing market’s performance. It is one of Canada’s largest residential REITs. KMP REIT owns, operates, and develops a portfolio of apartments and manufactured home communities worth over $3.5 billion.
The REIT focuses on increasing its profitability by improving its existing operations, diversifying its portfolio geographically through strategic acquisitions, and expanding its overall portfolio of high-quality properties in major markets. At writing, Killam Apartment REIT trades for $21.62 per share, and it boasts a 2.91% dividend yield.
Canada now has a historically low number of homes for sale as the pandemic-related conditions drove the market to record highs. The lack of supply and high demand will likely see the boost in the residential real estate segment extend to greater heights.
Purchasing investment property might require a greater cash outlay. However, investing in CAPREIT and Killam Apartment REIT could give you the necessary exposure to the real estate sector to take advantage of the trend and generate returns through monthly payouts and capital gains.