Canada’s real estate sector saw a recovery in the last quarter of 2024 as house-buying activity picked up. The demand was driven by interest rate cuts by the Bank of Canada. According to the Canadian Real Estate Association’s 2025 housing outlook, December 2024 sales were 13% higher than in May, a month before the rate cut. However, the reduction in immigration, the looming trade war, and an increase in inflation could offset the positive impact of a rate cut and slow the house-buying activity in 2025.
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Top real estate stocks for 2025
However, a limited number of retail spaces could continue to keep occupancy levels high in the retail sector.
CT REIT
In the real estate market, retail properties generate a higher rental income than home and office. It is also because retail stores are limited in supply. CT REIT (TSX:CRT.UN) could be a good investment because of its sound fundamentals, a 75% distribution payout ratio, and an interest-only debt whose maturities are spread over four years.
CT REIT has enjoyed an occupancy rate of more than 99% even under difficult economic conditions, as 90% of the stores are occupied by parent Canadian Tire and the remaining by big companies like Loblaw and Bank of Montreal. A strong occupancy will ensure regular rental income and a 3% dividend growth every July.
RioCan REIT
While CT REIT gives you exposure to retail and industrial properties across Canada, RioCan REIT (TSX:REI.UN) has a property portfolio of 186 properties, of which 85 are concentrated in the Greater Toronto Area. The Greater Toronto Area attracts high rent and has limited supply. The real estate investment trust (REIT) has a dividend payout ratio of 61.7%, giving it ample flexibility to withstand a mild recession triggered by potential Trump tariffs.
The Riocan REIT does not grow its dividends regularly or offer a dividend-reinvestment plan. However, it has room for dividend growth in the future.
U.S. real estate stock
Slate Grocery REIT (TSX:SGR.UN) can give you geographic diversification in your portfolio. While the above two REITs have a portfolio of Canadian properties, Slate Grocery REIT has a portfolio of 116 American retail properties spread across 23 states. The REIT’s 49% tenant base is supermarkets and grocers that are resilient to economic conditions.
The REIT has a 74% distribution payout ratio, hinting that it can sustain its distributions in 2025 despite economic uncertainty. The unit is trading at $13.85, while its net asset value (NAV) is US$13.77. As the Canadian dollar has depreciated against the U.S. dollar, the REIT is trading at a discount to its NAV. Slate Grocery REIT converts its U.S. dollar distributions to Canadian dollars for Canadian investors. You can lock in an 8.95% yield, which could grow as Canadian investors benefit from foreign exchange gains.
