Real estate investing in Canada has not been the most accessible aspect for Canadian investors for a long time — at least not in the traditional sense. Housing prices have been consistently high and climbing higher for several years until recent weeks.
Canadians who wanted to buy homes as investment properties and use them as passive-income streams had the opportunity to do so until interest rates were at historically low levels. However, growing concerns regarding record inflation levels required the Bank of Canada (BoC) to make significant changes.
Between the BoC and the U.S. Federal Reserve across the border, several interest rate hikes have been introduced in Canada and the U.S. this year. The recent-most Fed meeting saw the U.S. Fed enact its highest ever interest rate hike since 1994. The aftermath has been a meltdown in equity markets in the U.S. and Canada.
Falling share prices across the board are a cause for concern for most investors. However, Canadian investors with a long-term view of the market might look at it as an opportunity to capitalize on the market situation.
Buying a home might be even more inaccessible after interest rate hikes. However, there are other ways to gain exposure to the Canadian real estate industry’s performance at lower valuations. I will discuss two Canadian real estate plays that you could consider adding to your portfolio for this purpose.
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Brookfield Asset Management
Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM) is a $91.61 billion market capitalization global alternative investment management company. The company invests its own money alongside its clients’ funds in assets from several segments of the economy worldwide, including real estate.
While it is a real estate-focused stock, its investments in real estate account for a significant portion of its cash flows.
Brookfield Asset Management stock trades for $55.84 per share at writing, and it boasts a 1.27% dividend yield. Its real estate holdings are diversified across different countries worldwide and include assets from various sectors, from residential to hospitality, industrial, and corporate properties. It offers truly diversified exposure to various asset classes, making it an attractive option to consider amid the pullback.
RioCan REIT
RioCan REIT (TSX:REI.UN) $6.03 billion market capitalization real estate investment trust (REIT). It is Canada’s largest REIT. It owns, develops, and operates a diversified portfolio of retail-focused properties but has been recently diversified into mixed-use properties.
The trust took a massive beating amid the pandemic, and it needed the government’s support to make it through the global health crisis’ impact on its financials. However, RioCan REIT has made it through to the other side in decent shape.
The current pullback is doing a number on the trust. RioCan REIT trades for $19.49 per share at writing, and it boasts a 4.98% dividend yield. It is trading for a 25.04% discount from its March 17th levels. However, it has been putting up a stellar performance in recent weeks, and its board has decided to increase distribution again. It could be worth adding to your portfolio.
Foolish takeaway
The S&P/TSX Composite Index is down by 13.91% from its March 22, 2022, high at writing and at its lowest in 13 months. The market situation does not look very good right now. Equity securities across all sectors of the Canadian investors are in the red, and there could be more downward momentum until things stabilize.
Investors willing to stick it out for the long term and practice enough patience can establish positions in discounted income-generating assets at current levels for long-term outsized returns. RioCan REIT and Brookfield Asset Management stock are two real estate stocks that could be viable investments for this purpose.
