“REITs win,” said Michael Smith, an analyst at Macquarie Equities Research who has spent the last five years comparing the cap rates of condo investment with the returns on apartment REITs. “What I would say now, since I did the last study, is if anything the outlook for the REIT versus the condo is even more compelling given where the condo market seems to be correcting.”
Early this year, his number crunching suggested REIT investors were won an average return of 31.5% over the past year. That’s more than double the return on a Toronto condo and five times that for a Calgary one.
The discrepancy was even wider four years ago, he said. Still, even today’s numbers are enough to turn the heads of an increasing number of condo investors, re-examing their strategy.
The math is compelling: While the average $353,147 home with a 5% down payment, it will cost an investor close to $1,600 in monthly mortgage costs at today’s interest rates, the rent on the average two-bedroom apartment stands at closer to $900.
It means purpose-built apartment building complexes will increasingly win the kind of returns many individual investors are now getting with their condo and single-family investment, say analysts.
Still those numbers also suggest condo investors are also in the driver’s seat as occupancy rates across urban markets rise about 99 per cent.
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