Today, bad news rules the day for the Canadian real estate market, though the iShares S&P / TSX Capped REIT Index fund (TSE:XRP) gained modestly in Monday morning’s trading. This is in spite of developments that say the Canadian condo market is foundering, amid signs of a broader real estate slowdown already in progress.
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Word from the Bank of Montreal, via senior economist Robert Kavcic, declared, “We’re pretty much at a recession in the condo market.” Some markets are doing better than others, like Montreal and Edmonton, but a broadening slump in other markets like Toronto, southern Ontario, and Vancouver is hitting the overall market hard, Kavcic noted.
Worse, Kavcic does not look for any relief in the short term either, noting, “We’re probably going to be in this soft type of environment for a couple of years going forward.” Another report noted that the condominium market for the greater Toronto area is down 30% against this time last year, and even when there were buys, they were less expensive than they were. The current average price paid was $678,048, down 6.8% against this time in 2024, and down 16.5% against the peak in 2022.
Worse News: Not Just Condos
As it turns out, the problem is not just a general slump in condos. It seems to be the entire real estate market taking the hits on this one. The Canadian Real Estate Association revealed that home sales were down 10% across the board last month. All told, 44,300 residential properties were purchased throughout Canada, against 49,135 in April 2024.
The reason seems to be the standard one: a combination of a worsening economy coupled with the tariffs is putting the brakes on people’s interest in buying a home. That means sellers are outnumbering buyers and putting weigh on prices accordingly. New listings are also starting to decline, suggesting that sellers are reading the writing on the walls that will not sell anyway.
Is the iShares S&P / TSX Capped REIT Index ETF a Good Buy Right Now?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on TSE:XRE shares based on 15 Buys and two Holds assigned in the past three months, as indicated by the graphic below. After a 0.33% rally in its share price over the past year, the average TSE:XRE price target of C$17.39 per share implies 14.49% upside potential.
