Hi, I’m Rose Jacobs, here with you for Kalkine media. Today we’re going
to check out How Canada’s commercial and housing real estate may look in 2022. But
first, make sure you press the bell icon for all the latest updates here
on Kalkine media. Canada is not an isolated economy. The real estate market touched new
records not only in Canada but also in the US, the UK, Australia, and other developed economies. This
hints toward similar changes in the coming days in all these economies when central banks,
including the Fed and the Bank of Canada, start raising interest rates coupled with
QE that is Quantitative Tightening tapering by purchasing lesser bonds or even resorting to QE,
if need be. Cheaper mortgages set the sector on fire. The
most evident result of near-zero benchmark rates in all the economies was the cheap mortgage
loan. Accommodative stance in the wake of economic downturn triggered
by the pandemic fuelled speculations that mortgage is cheap, and this is the best
time to invest in a real estate asset. High inflation is a cause of worry. The central bank
has accepted that low rates triggered a buying frenzy in real estate. And this could be one of
the reasons why central banks might suck liquidity earlier-than-expected. That said, this correction
might not push much pressure and prices might still hover around the new peaks even in 2022.
No big crash is likely given the economy is heading back to pre-pandemic macroeconomic levels,
and sellers would be hesitant to sell their assets at a lower price. The latter aspect might,
however, trigger a little stagnation in the real estate sector, but price crash is unlikely. Now to
the S&P/TSX Capped REIT Index. Capped REIT Index is made up of real estate income trusts. The term
‘capped’ in the name means that the relative weight of each constituent stock is capped at
25 per cent. The Canadian Apartment Properties Real Estate Investment Trust and the RioCan Real
Estate Investment Trust are two of the biggest constituents. The Canadian Apartment Properties
Real Estate Investment Trust has a market cap of over C$10 billion and the RioCan Real
Estate Investment Trust has the market cap of over C$7 billion. Conclusively, several factors
are at play in the real estate sector. All over the world, the past one and a half years was
a time of frenzy in housing prices and sales volume. Low mortgage rates encouraged buyers.
But the rising inflation can now compel the Bank of Canada and other central banks to rein
in liquidity. This can make borrowing costlier. However, the recent high gains are not likely
to be erased in the near-to-medium term, and hence real estate stocks might gain some more value. And
that’s it for today. If you like what you’ve learned then don’t forget to like, share and
subscribe and go to kalkinemedia.com for all our latest. I’m Rose Jacobs, see you next time!