Apartment Real Estate Investments Undervalued, Time to Develop Apartments

timthumbCanadian REITs yielding more than American counterparts

The value of shares in Canadian real estate investment trusts remain stubbornly low, according to financial experts, saying that their performance on the stock market does not reflect their performance in the industry. Experts have listed shares of Canadian REITs as good long-term buys as a result.

The upside of Canadian REITs does not surprise Derek Lobo, CEO and Broker of Record at ROCK Advisors Inc., Brokerage. “Purpose-built rental apartments avoided the 2008 recession, and continue to outperform all other sectors in the real estate market,” says the, which specializes in brokering apartment buildings. “Apartments provide an ongoing income through the financial/economic cycle, and they look set to outperform the market again even as regular housing starts slow across Canada.”

Apartments Long-Term Value Bolsters Real Estate Industry

The Toronto Census Metropolitan Area 36,186 housing units started January up from 32,281 the month before, according to numbers released by Canada Mortgage and Housing Corporation. This number was bolstered by apartment starts, the CMHC claimed, as projects that were launched in 2011 reached sales targets and officially began construction.

However, housing starts declined by 2.7 percent across Canada in January, dropping to 163,158 units. Stronger starts in Ontario and the Prairie Provinces were offset by drops in British Columbia, Quebec and Atlantic Canada. This led Bank of Canada governor Stephen Poloz to hope for a soft landing in the housing market for 2014, after prices saw a 10 percent increase in 2013. Where housing starts are slowing, apartments are offering investors opportunities for shelter.”

The heated housing markets are why apartments will do better in 2014 and 2015,” says Lobo. “More and more Canadians are finding that the high cost of home ownership isn’t what it’s cracked up to be. Even with condominiums, the cost of maintaining a mortgage and paying condominium fees presents an ownership premium of 10 percent over what it costs to rent an apartment. You can live a lot better with 10 percent more in your pocket.”

Apartment Boom Supplementing Condominium Boom

Lobo sees apartments as a refuge for developers looking to maintain incomes should demand for condominiums slow. “Everything that a condominium developer does can be applied to the building of apartments,” says Lobo, “and purpose-built rental apartments give such developers an ongoing revenue stream if they hold onto a building and rent out the units rather than selling the building for a quick buck. These developers just need to learn how to manage their properties, and there are consulting firms that can help with that task.”

Lobo’s companies, ROCK Advisors Inc., Brokerage and DALA Group of Companies, has advised apartment owners on the best ways to manage their properties to maximize their income and minimize operating costs.

“ROCK has a good team of people who are focused on New Apartment Construction,” says Greg Romundt, the president of the Centurion Apartment REIT. “They were the first brokers actively promoting this sector. They’re the pioneers pointing the way to the opportunities in this exciting new realm.”

To find out more about ROCK’s dedicated team of Agents and Real Estate Analysts call or email us at 905-331-5700 Ext 13 info@rockadvisors.ca

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