Canadian Housing Starts Below Estimates, Will it Affect Real Estate Stocks?

Canadian Housing Starts Below Estimates, Will it Affect Real Estate Stocks?
New Home Construction Falls Short of Expectations in May

New home construction numbers for May came in significantly below market expectations, with figures showing an 8% shortfall from what analysts had forecasted. The latest data from the housing sector indicates a troubling slowdown, raising concerns about the broader implications for the economy and the housing market.

Here are some potential effects on the top housing stocks:

1. Canadian Apartment Properties Real Estate Investment Trust (CAPREIT) (CAR.UN)

  • Impact: As a major landlord, a slowdown in new housing starts could reduce competition from new builds, potentially supporting occupancy rates and rental income. However, it could also signal broader economic concerns that might affect tenant stability and rent growth.
  • Average Analyst Target Price: CAD 56.38 over the next 12 months based on forecasts from 6 analysts.
  • Average Analyst Rating: Strong Buy.
  • Stock Target Advisor Analysis: Bearish, based on 3 positive signals and 8 negative signals.
  • Recent Stock Price: CAD 43.00 at the last closing.
  • Stock Performance: Decreased by -0.76% over the past week, -5.01% over the past month, and -11.52% over the last year.

2. Boardwalk Real Estate Investment Trust (Boardwalk REIT) (BEI.UN)

  • Impact: Similar to CAPREIT, Boardwalk might see a positive impact from less competition due to fewer new units coming online. However, broader economic concerns that lead to lower housing starts could also weigh on tenant demand and rental rates.
  • Average Analyst Target Price: CAD 83.38 over the next 12 months based on forecasts from 7 analysts.
  • Average Analyst Rating: Buy.
  • Stock Target Advisor Analysis: Neutral, based on 8 positive signals and 8 negative signals.
  • Recent Stock Price: CAD 68.66 at the last closing.
  • Stock Performance: Decreased by -2.26% over the past week, -5.65% over the past month, and increased by +13.58% over the last year.

3. Killam Apartment Real Estate Investment Trust (Killam REIT) (KMP.UN)

  • Impact: Killam, with a significant presence in Atlantic Canada, may benefit from reduced new supply. However, economic factors driving the housing start decline could negatively affect tenant affordability and rental income.
  • Average Analyst Target Price: CAD 21.78 over the next 12 months based on forecasts from 12 analysts.
  • Average Analyst Rating: Strong Buy.
  • Stock Target Advisor Analysis: Neutral, based on 7 positive signals and 7 negative signals.
  • Recent Stock Price: CAD 16.87 at the last closing.
  • Stock Performance: Decreased by -2.60% over the past week, -6.02% over the past month, and -3.60% over the last year.

4. Minto Apartment Real Estate Investment Trust (Minto REIT) (MI.UN)

  • Impact: Reduced new housing starts can decrease competition for existing rental units, potentially supporting occupancy and rental rates. But if the decline is due to economic weakness, there could be negative implications for tenant demand.
  • Average Analyst Target Price: CAD 19.96 over the next 12 months based on forecasts from 10 analysts.
  • Average Analyst Rating: Strong Buy.
  • Stock Target Advisor Analysis: Slightly Bearish, based on 4 positive signals and 9 negative signals.
  • Recent Stock Price: CAD 14.55 at the last closing.
  • Stock Performance: Decreased by -4.15% over the past week, -4.84% over the past month, and -3.00% over the last year

5. InterRent Real Estate Investment Trust (InterRent REIT) (IIP.UN)

  • Impact: A slower pace of new housing starts may limit competition, which could benefit existing rental properties. However, economic concerns might still negatively impact tenant stability and rental income.
  • Average Analyst Target Price: CAD 15.04 over the next 12 months based on forecasts from 11 analysts.
  • Average Analyst Rating: Strong Buy.
  • Stock Target Advisor Analysis: Bearish, based on 3 positive signals and 9 negative signals.
  • Recent Stock Price: CAD 11.75 at the last closing.
  • Stock Performance: Decreased by -0.84% over the past week, -4.55% over the past month, and -7.04% over the last year.

6. Mainstreet Equity Corp. (MEQ)

  • Impact: Fewer new builds could mean less competition and higher demand for existing rental properties. Yet, if the slowdown is driven by economic weakness, it could negatively impact the ability of tenants to pay rent.
  • Average Analyst Target Price: CAD 180.00 over the next 12 months based on forecasts from 1 analyst.
  • Average Analyst Rating: Strong Buy.
  • Stock Target Advisor Analysis: Slightly Bullish, based on 6 positive signals and 4 negative signals.
  • Recent Stock Price: CAD 160.00 at the last closing.
  • Stock Performance: Decreased by -5.24% over the past week, -8.14% over the past month, and increased by +18.74% over the last year.

7. Timbercreek Financial Corp. (TF)

  • Impact: As a provider of structured financing, Timbercreek could see reduced demand for new construction loans. However, ongoing economic stability and demand for rental properties might mitigate some negative impacts.
  • Average Analyst Target Price: CAD 8.46 over the next 12 months based on forecasts from 3 analysts.
  • Average Analyst Rating: Strong Buy.
  • Stock Target Advisor Analysis: Neutral, based on 7 positive signals and 7 negative signals.
  • Recent Stock Price: CAD 7.20 at the last closing.
  • Stock Performance: Unchanged by +0.00% over the past week, increased by +2.27% over the past month, and decreased by -4.38% over the last year.

8. Dream Unlimited Corp. (DRM)

  • Impact: As a developer, reduced housing starts could directly impact Dream’s new development projects. However, a shift in focus to mixed-use developments and sustainable projects could offer some resilience.
  • Average Analyst Target Price: CAD 28.20 over the next 12 months based on forecasts from 1 analyst.
  • Average Analyst Rating: Strong Buy.
  • Stock Target Advisor Analysis: Bearish, based on 3 positive signals and 10 negative signals.
  • Recent Stock Price: CAD 18.30 at the last closing.
  • Stock Performance: Decreased by -3.68% over the past week, -7.76% over the past month, and -11.55% over the last year.

9. Granite Real Estate Investment Trust (Granite REIT) (GRT.UN)

  • Impact: Primarily an industrial REIT, Granite might not be directly impacted by residential housing starts. However, mixed-use developments with residential components could see some effect from the broader market slowdown.
  • Average Analyst Target Price: CAD 87.69 over the next 12 months based on forecasts from 9 analysts.
  • Average Analyst Rating: Strong Buy.
  • Stock Target Advisor Analysis: Slightly Bearish, based on 6 positive signals and 11 negative signals.
  • Recent Stock Price: CAD 65.13 at the last closing.
  • Stock Performance: Decreased by -4.84% over the past week, -7.62% over the past month, and -14.13% over the last year.

General Implications

  • Reduced Competition: Lower housing starts can mean less new supply entering the market, which might support occupancy rates and rental prices for existing residential REITs and property managers.
  • Economic Concerns: If the decline in housing starts is a result of broader economic issues, such as rising interest rates, inflation, or reduced consumer confidence, this could negatively affect tenant demand, rental income, and overall economic stability.
  • Investor Sentiment: Negative news on housing starts might lead to a temporary dip in stock prices due to reduced investor confidence in the sector. However, companies with strong fundamentals and diversified portfolios may recover more quickly.

Impact & Outlook

The impact of the housing start miss will vary across different residential real estate companies based on their specific focus and geographic diversification. While reduced competition might provide some benefits, broader economic concerns could pose challenges. Investors should consider these factors and the overall economic outlook when evaluating the potential impact on their investments in Canadian residential real estate stocks.

Top Trending Stocks

AVG Analyst Rating STA Analysis
N/A
StockTargetAdvisor
Neutral
StockTargetAdvisor
Strong Buy
StockTargetAdvisor
Slightly Bullish
StockTargetAdvisor
Strong Buy
StockTargetAdvisor
Slightly Bullish
StockTargetAdvisor
Strong Buy
StockTargetAdvisor
Slightly Bearish
StockTargetAdvisor
Hold
StockTargetAdvisor
Neutral
N/A
StockTargetAdvisor
Neutral
StockTargetAdvisor
Strong Buy
StockTargetAdvisor
Neutral
StockTargetAdvisor
Strong Buy
StockTargetAdvisor
Slightly Bullish
StockTargetAdvisor
Hold
StockTargetAdvisor
Bearish
StockTargetAdvisor
Strong Buy
StockTargetAdvisor
Slightly Bullish
Ad
Ad

Leave a Reply

Your email address will not be published. Required fields are marked *