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2 residential REITs Canadians can buy in June by The Motley Fool

© Reuters. 2 residential REITs Canadians can buy in June

Prices in the Canadian housing market continue to remain high in 2022, despite a challenging macroeconomic environment. According to a Global News report, home sales in the Greater Toronto Area real estate market fell 39%, but prices still rose 10% year-over-year. Home sales in May in Ontario were 7,283 units compared to 11,903 for the same period last year. It also fell by 7,989 units in April 2022.

The decline in housing unit sales can be attributed to higher interest rates as well as rising inflation figures, which have reduced consumer spending. Some potential buyers expect prices to drop in the future and delay their buying decisions.

Despite a decline in residential unit sales, the average purchase price of a home rose to $1.21 million in May from $1.10 million a year earlier. But average home prices were below the $1.25 million price seen in April. Currently, house prices have fallen for the third consecutive month.

In an interview with Global News, BMO (TSX:) Capital Chief Economist Doug Porter explained, “The pullback in sales now goes far beyond simply reversing the outsized strength of a year ago is now well below average, with inventories accumulating rapidly.

If investors want exposure to the Canadian housing market, it makes sense to consider real estate investment trusts (REITs) such as Killam Apartment (:KMP.UN) and Canadian Apartment Properties (TSX:CAR.UN) .

Killam Apartment In the first quarter of 2022, Killam Apartment reported net income of $60 million, an increase of $32.6 million from net income of $27.4 million a year ago. The growth in net income was attributed to fair value gains on investment properties due to higher rents and high occupancy as well as acquisitions, completed developments and increased profits from the existing portfolio .

Its net operating income rose 12.4% to $45.3 million while funds from operations rose 4.3% to $0.24 per share. Its adjusted funds from operations were $0.20 per unit, a 5.3% year-over-year increase.

Killam’s development program is expected to generate revenue and profit over the next two years. Its properties at Latitude and Lay are open and 60% are already let. The company also increased its portfolio by $60.5 million, focusing on acquisitions in Victoria, Halifax, Waterloo and Guelph.

Killam Apartment offers investors a tasty 3.5% dividend yield, which is sustainable given that it earns investors $0.70 per share per year.

Apartment Properties in Canada Shares of apartment properties in Canada have nearly doubled in the past 10 years, after adjusting for dividends. It offers investors a forward yield of 3%, which also makes the stock attractive to income investors.

In the first quarter, its occupancy rate rose to 98%, compared to 97.3% in the same period last year. Additionally, average monthly rates increased by 3.9%, allowing Canadian Apartment Properties to strengthen its balance sheet and liquidity position.

During the March quarter, Canadian Apartment Properties increased operating sales by 8.4% due to acquisitions, higher occupancy rates and higher rental income. Comparatively, total net operating income jumped 4.4% due to weather-related maintenance costs, higher utility costs, higher property taxes and higher prices.

Canadian Apartment is well positioned to grow its revenue in 2022 and beyond, as it purchased 1,015 suits and locations in the first quarter, for a total of $439 million. Its acquisition pipeline remains strong, which should unlock value for long-term unitholders.

The post 2 Residential REITs Canadians Can Buy In June appeared first on The Motley Fool Canada.

Foolish contributor Aditya Raghunath has no position on the stocks mentioned. The Motley Fool holds positions and recommends Killam Apartment REIT.

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