GDP falls; real estate industry partly to blame
Canada’s real gross domestic product (GDP) fell 0.1 per cent in January due in part to sagging construction and diminishing output from real estate professionals. "Construction fell 0.4 per cent in January. Both residential and non-residential building construction were down, while engineering construction was up,” an official Stats Canada release states. “The output of real estate agents and brokers decreased 5.7 per cent in January, a fifth consecutive monthly decline. The decline was mainly the result of weakness in the home resale market in Alberta and Saskatchewan.” January’s slight decline follows an uptick of 0.3 per cent in December. Read more here
Oil slump makes Canadian REITs a bargain
Property investors seeking a bargain may want to turn to Canada, where real estate investment trusts are the cheapest relative to their U.S. peers since the financial crisis. According to BNN.ca, stockholders are paying 13 times a Canadian REIT’s funds from operations to own shares in 51 companies, data compiled by Bloomberg show. Shareholders in 210 U.S. REITs forked over 20 times the cash-flow measure at the end of last year. The difference between the two ratios is the widest since 2009. “It’s a good time to invest in Canadian REITs,” said Anil Tahiliani, who manages about $1.1 billion, at McLean & Partners Wealth Management Ltd. and owns the stocks. “They’re partly reflecting concerns about the Canadian economy, housing and the effect of low oil. But we’re going to be in a low-interest-rate environment, and Canada is still better off. Rates aren’t as likely to go up in Canada as in the U.S.” Real estate values north of the 49th parallel have fallen as oil prices drop by half and the Canadian dollar slides. That’s lowered the price of Canadian REITs, and pushed their yields more than two percentage points above U.S. REITs.
Oil towns struggling as sales continue to drop
Two oil towns that have defined Alberta’s resource – and real estate – boom now show how fast the bloom can fade. According to an article from Business In Vancouver, in Fort McMurray, the city of 76,000 at the centre of Canada’s biggest oil fields, housing sales plunged 66 per cent in February and are down 30 per cent through the first two months of this year, the local real estate board reports. Only 48 houses sold last month and the rental vacancy rate has spiked to 12 per cent, the highest in Alberta. Further south in Cold Lake, total building permits plunged to $1.7 million, down from $8.9 million in the first two months of 2014. New housing starts have collapsed. Only two new single-family permits were issued since January, compared to 20 in the same period a year earlier. Read more here