Safety and diversification are two reasons long-term income-focused investors choose to invest in real estate investment trusts (REITs); however, right now, many investors have noticed that Canada’s real-estate market may not be as rock solid as once thought, and many investors are starting to become wary of a market which has produced incredible results over the past decade relative to other markets globally.
With house prices in Canada’s largest real estate market (Toronto) beginning to cool following the provincial government’s attempt at cooling the market, many of the bubbles investors have seen popping up in most major Canadian metropolitan areas are now under the microscope of regulators, home buyers, and investors.
It is now becoming more and more prescient for REITs with exposure to Toronto and Vancouver to focus on the diversification effect of REITs as opposed to traditional real-estate investment methods, highlighting investments in other parts of the country that may produce lower, but steadier, returns.
On this point alone, investors may want to consider REITs with the lowest exposure to major Canadian metropolitan markets. Those REITs focusing primarily on “fringe” areas, less-well-known among the mainstream investment crowd, may turn out to be the winners over the next decade.
As such, my top pick for a residential REIT that should outperform the others is Killam Apartment REIT (TSX:KMP.UN), a REIT with exposure concentrated in the Canadian Maritimes, an area with “slow and steady” attributes which may suit even the most cautious investors.
