- Royal LePage is forecasting that the median price of a single-family home in Canada’s recreational market will increase by 5 per cent year-over-year in 2024
- Interest rate cuts may expand buying activity across the broader Canadian residential market, opening the door for investors to capitalize on undervalued stocks exposed to the space
- Read on for three Canadian real estate stock picks to add to your watchlist
Royal LePage is forecasting that the median price of a single-family home in Canada’s recreational market will increase by 5 per cent year-over-year in 2024 to C$678,930, propelled by higher consumer confidence to compete for limited supply. This includes a rise in every individual Canadian recreational market, with Ontario estimated to see the greatest increase at 8 per cent.
In 2023, the weighted median price of a Canadian single-family home in recreational property regions decreased by 1 per cent year-over-year to C$646,600, following a year-over-year decline of 11.7 per cent in 2022. Despite this pullback, the national weighted median single-family home price is still 59 per cent above 2019 levels.
Royal LePage relates these high prices to the desire for “more space, privacy and access to nature during the height of the COVID-19 pandemic,” according to Wednesday’s news release, causing many recreational real estate markets to experience “a deep cut to their available home supply as buying activity soared.”
Markets continue to maneuver through low inventory levels, with 41 of 150 surveyed recreational real estate professionals at Royal LePage experiencing less inventory year-over-year. The report sees this trend continuing, paving the way for “sustained and growing demand” for a limited number of properties and “upward price pressure” on Canada’s recreational market.
The report notes that buying activity may begin to intensify once the Bank of Canada institutes its first interest rate cut, which is expected as soon as next month. Sixty-two per cent of those surveyed see a slight demand increase upon lower rates, while 21 per cent expect demand to increase significantly.
Three undervalued Canadian real estate stocks
If we take the expected rise in Canadian recreational real estate prices as a sign of a broader residential market recovery – contingent on borrowing costs continuing to decrease and support buying activity – investors stand to benefit from building a watchlist of underpriced, high-quality stocks exposed to residential real estate to buy at the earliest sign of upward momentum. Here are three Canadian real estate investment trust (REIT) stocks to consider:
- Shares of Northview Residential REIT (TSX:NRR.UN) have given back 53 per cent from their all-time high in 2021, last trading at C$13.93 per share. This share price-action contradicts how the company has been increasingly profitable over the past two years, pulling in more than C$230 million combined.
- Shares of InterRent REIT (TSX:IIP.UN) are flat since the pandemic hit markets in March 2020, last trading at C$14.26 per share, despite the company posting positive net income each year since 2020 for a combined total of more than C$700 million.
- Shares of Minto Apartment REIT (TSX:MI.UN) are down by 40 per cent since their all-time high in 2020, last trading at C$16.80 per share. The stock looks undervalued thanks to an overreaction from shareholders, who have interpreted management’s sound capital allocation decisions in 2023, which led to a C$116 million net loss, as a sign of continued losses into the future, even though the company sees further growth ahead. It’s also worth mentioning that Minto made more than C$500 million in profit from 2019 to 2022 before deciding to strengthen its balance sheet in 2023.
If any of our picks catches your eye, make sure to run it through your personal due diligence process before committing to an allocation, including an assessment of how it might fit within your financial goals, risk tolerance and risk capacity.
You can brush up on investing fundamentals by reading last month’s How to invest: A comprehensive guide to growing your money.
About Royal LePage
Royal LePage is Canada’s leading real estate services provider. It operates a network of approximately 20,000 real estate professionals in more than 670 locations nationwide.
The company is owned by Bridgemarq Real Estate Services (TSX:BRE), a service provider for residential real estate brokers and a network of approximately 21,000 realtors. Its flagship brands include Via Capitale and Johnston & Daniel.
Shares of Bridgemarq Real Estate Services (TSX:BRE) opened with a gain of 0.29 per cent, trading at C$13.74 per share. The stock is flat year-over-year and has given back about 15 per cent since 2019.
Join the discussion: Learn what other investors are saying about these Canadian real estate stocks on the Northview Residential, InterRent and Minto Apartment Bullboards, and check out Stockhouse’s stock forums and message boards.
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