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Real estate - Is now a good time?

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We get this question alot. There are several answers depending on your need. If you are going to live in it, it's really not an investment, until you potentially retire and have to sell.


To buy a rental income property there will be property management issues like the leaky roof, wet basement, and unwanted pests (Zoe calls this the "cockroach call"). There are also the inescapable property taxes, insurance and the like.


Real Estate Investment Trusts (REITs) provide an easy way to invest in every flavour from residential (Canadian Apartment REIT, CAR.UN) to commercial rental properties (RioCan) to nursing homes (Chartwell, CSH). You can also invest in a basket of REITs through the iShares ETF, XRE...... BUT. How does it work for real estate with interest rates are on the rise? Real estate, like utilities, telecoms and piplelines provide yield but when interest rates are rising, particularly on high quality government bonds, it makes the additional yield on lower risks (real estate, utilities, telecoms and pipelines) less attractive. Have a look at the chart. The yield on 10 year Government bonds is almost perfectly negatively correlated to real estate as measured by the real estate ETF, XRE as mentioned above.


Long story short, at this time, at the inflection point of a rise in interest rates it may not be the perfect time to buy into real estate.


Disclaimer:This publication is solely the work of Scott Blair for the private information of his clients. Although the author is a Manulife Securities Advisor, he is not a financial analyst at Manulife Securities Incorporated or Manulife Securities Insurance Inc. (“Manulife Securities”). This is not an official publication of Manulife Securities. The views, opinions and recommendations are those of the author alone and they may not necessarily be those of Manulife Securities. This publication is not an offer to sell or a solicitation of an offer to buy any securities. This publication is not meant to provide legal, accounting or account advice. As each situation is different, you should seek advice based on your specific circumstances. Please call to arrange for an appointment. The information contained herein was obtained from sources believed to be reliable; however, no representation or warranty, express or implied, is made by the writer, Manulife Securities or any other person as to its accuracy, completeness or correctness