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3 Canadian Real Estate Stocks Set to Profit from the Housing Boom

The Canadian housing market is likely to continue trading on the downside, but could turn around at the end of 2023. So, where to invest?

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published May 2, 2023 7:15 pm EDT

I know, it’s a pretty crazy thing to think about right now. A housing boom? With interest rates through the roof and a crash in prices? The Canada Mortgage and Housing Corporation (CMHC) continues to believe the decrease in housing prices in 2022 will continue into 2023. However, there should be a rise sometime in 2023, which could affect real estate stocks.

That rise in the housing market should come sometime in 2023 and continue into 2024 and beyond. So, what company will benefit from these new conditions, and which should investors hop on now?

RioCan

Investors looking for a recovery would definitely do well considering RioCan REIT (TSX: REI.UN), even right now. The company makes investments in mixed-use properties in urban areas where there is a lot of foot traffic. You can live, work, and shop in the same location.

Yet, of course, shares haven’t been doing well with the market the way it is. Which is why now is a great time to pick it up for a turnaround. It currently holds a market cap at $6.2 billion, marking it as one of the largest real estate investment trusts (REIT) in the country. It trades at 0.81 times book value, and offers a dividend yield at 5.16% as of writing.

What makes it great now as well is that again, it’s mixed use. There is income coming in from multiple uses of the same property. In fact, RioCan is doing so well after reaching the high end of its funds from operations (FFO) guidance, it increased its distribution by 6%.

CAPREIT

Don’t just think about real estate stocks that have residences for purchase, but also ones that can be rented out. The housing crisis bleeds into rental properties as well, which is why Canadian Apartment Properties REIT (TSX: CAR.UN) is also one to consider right now.

The company is one of the real estate stocks that also falls in the category of the biggest in Canada with a market cap at $8.5 billion as of writing. It also offers diversification, as not only does it invest in rental properties in Canada, but also in global locations.

Shares are back where they were in the beginning of 2022, up 14.5% year to date. They definitely trade on the expensive side, but should continue to do well in the near future. CAR currently offers a 2.94% dividend yield as of writing, and analysts continue to believe there is more room to run. Especially should the market recover by the end of 2023.

InterRent

Finally, I have another rental property REIT for investors to consider. The market demand for homes is high. Rents are through the roof, and the need is there not just from Canadians, but also from an influx of immigrants needing housing as well. So a company like InterRent REIT (TSX: IIP.UN) should continue to do quite well in this environment when the housing market recovers.

Shares are still down 4% in the last year for the $1.8-billion company, though it perhaps holds the best deal trading at 10.7 times earnings as of writing. You can also bring in a dividend yield at 2.78% right now.

And InterRent stock hasn’t slowed down, continuing to make more acquisitions while the market is down. It’s a smart play, and one InterRent looks like it can afford at these levels. That’s why it should make a strong recovery when housing demands picks up once more.