The Financial Post reports in its Tuesday edition that some investors may have fallen out of love with Canadian REITs, but rent price inflation could provide a leg up for the sector.
The Post's Jonathan Ratner writes that the latest round of information on home prices in the Greater Toronto Area marked a 33-per-cent year-over-year increase for February.
That is not sustainable, Canaccord Genuity Group says analyst Martin Roberge.
He points to Teranet figures that show Canadian housing price inflation is up 13.4 per cent on an annual basis, approaching the previous cycle's peak of 14.1 per cent in 2006.
He says, "It is just a question of time before housing price inflation spills over into rental inflation."
Rental inflation is just 0.5 per cent year-over-year, but Mr. Roberge believes that likely represents a trough. That is because increasingly unaffordable housing, coupled with tighter mortgage standards, push households to the rental market.
He says: "We have often referenced 2006 as a possible roadmap for financial markets in 2017. Well, if 2006 is any guide, the upcoming upturn in Canada rent-price inflation bodes well for Canadian REITs."
Canadian REITs posted a 29-per-cent return in 2006.
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