Canadian real estate continues booming, and home-building stocks are reaping the industry’s continued growth benefits.
Over the next four years, the country’s real estate market is expected to grow by 3.89 per cent, resulting in a market volume of more than US$9.5 trillion.
Fueling that growth will be an increase in demand and prices driven by low-interest rates and an increase in foreign buyers.
In tandem with this, home-building stocks across the country also benefit from this growth. According to the Canadian Mortgage and Housing Corporation (CMHC), housing costs for Canadians became almost unattainable in 2023.
However, as demand for housing continues to grow, so does the need for construction and, in turn, the companies behind it all.
What are home-building stocks?
Putting it simply, home-building stocks are essentially stocks of the companies that construct and sell residential properties.
These companies build everything from houses and apartments to other residential structures, such as sheds and garages, and sell the properties to buyers.
Like other industries, investing in home construction stocks means you’re buying into a piece of the company, but the home-building industry is linked to the success of economic development and residential growth.
What this means is that investing in these companies can be profitable. But it can also come with risks because of market fluctuations, resulting in changing share prices.
How to invest in home-building stocks
Investing in these companies isn’t unlike any other, but if you’re new to investing here’s how to invest.
Opening an online brokerage account
If you don’t already have one, the first step to investing in home-building stocks is opening a brokerage account.
A brokerage account is an account that allows you to purchase investments such as stocks, bonds and mutual funds. Money can be added to the account from your bank account and be used to buy investments.
Investing through an online trading platform
These include ones through a banking institution or day-trading platforms such as Questrade or Wealth Simple in Canada
Online trading platforms are essentially software systems used to trade securities and enables investors to trade, monitor, open, close and manage their stocks online.
Investing through a bank
Through your bank, open an investment account where you can choose from Canadian and U.S. stocks, common and preferred shares, new issues, options, rights and warrants, mutual funds, exchange-traded funds and more.
Investing through a financial advisor
A financial advisor will offer advice on home-building stocks that best suit your needs and financial goals. Managing investments with a financial advisor can help alleviate the pressure of navigating the markets on your own especially if you’re navigating new territory.
One thing, in particular, to understand before investing in home-building stocks is how multi-layered the industry is with many moving parts. Within the home-building stocks industry are offices, residential sites, infrastructure as well as financing.
Because of this, investors will want to truly consider what best fits their portfolio before investing.
Important to remember, however, is the risk of investing that can include market risk, liquidity risk and concentration risk, among others.
In other words, risk means the potential of losing the money you invest into your portfolio, so be as mindful as possible.
A deep dive into home-building stocks
Investing in home-building stocks is similar to other markets – some of the ways investors can do so is through exchange-traded funds (ETFs) or stocks.
ETFs are a blend of stocks and bonds that trade like similar stocks on an exchange.
Exchange traded funds
With that in mind, home-building ETFs in Canada include:
CIF provides investors with exposure to companies from around the world involved in the infrastructure sector, including transportation, water utilities and electricity services.
As of the time of this writing, CIF has 10 holdings in its portfolio spread across industries such as industrials, energy and utilities.
Its top three holdings include:
- Sterling Infrastructure (NASDAQ:STRL)
- Stantec (TSX:STN)
- NRG Energy (NYSE:NRG)
BMO Global Infrastructure ETF (TSX:ZGI)
This ETF offers exposure to publicly traded companies with more than 70 per cent of their revenues from infrastructure.
ZGI currently has 50 holdings in its portfolio, including:
- American Tower (NYSE:AMT)
- Enbridge (TSX:ENB)
- National Grid (NYSE:NGG)
AGFiQ Global Infrastructure ETF (NEO:QIF)
Incepted in 2018, QIF uses several factors to evaluate global infrastructure equities to provide investors with long-term capital appreciation with as little volatility as possible.
Across its holdings include companies engaged in utilities, industrial, energy and real estate, among others.
- Enbridge
- Vinci SA (OTC:VCISF)
- Aena SME SA (OTC:ANNSF)
Stocks
No one-size-fits-all or one correct answer is available for which home-building and real estate stocks are the best because it depends on each investor’s portfolio and what his or her long-term goals are.
That being said, some companies that might intrigue investors include:
WSP Global (TSX:WSP)
WSP Global provides technical advice to a wide range of clients across different sectors, including transportation and infrastructure, earth and environment, property and buildings, power and energy and industry market sectors.
The company also offers highly specialized services in project and program delivery and advisory services and operates in different segments: Canada, the Americas, Europe, the Middle East, India and Africa and Asia Pacific, which is composed of Asia, Australia and New Zealand.
RioCan Real Estate Investment Trust (TSX:REI.UN)
RioCan owns, manages, and develops retail-focused mixed-use properties with a portfolio ranging from leasing and development to residential.
Its properties are held by tenants such as grocery, pharmacy, liquor, personal services and specialty and value retailers. Under its portfolio are 192 properties with an aggregate net leasable area of roughly 33.6 million square feet including office, residential and rental as well as 10 development properties.
Stantec (TSX:STN)
Stantec is a sustainable design and engineering company that provides comprehensive professional services in the area of infrastructure and facilities for clients in the public and private sectors.
The company operates across Canada, the United States and other areas of the world, with services including engineering, architecture, interior design, landscape architecture, surveying, environmental sciences and project management among others.
Canadian Apartment Properties Real Estate Investment Trust (TSX:CAR.UN)
Canadian Apartment Properties Real Estate Investment Trust provides rental housing and owns and manages interests in multi-unit residential rental properties, including apartments, townhomes and manufactured home communities. The company owns approximately 65,000 residential apartment suites, townhomes and manufactured home community sites across Canada and the Netherlands.
InterRent Real Estate Investment Trust (TSX:IIP.UN)
InterRent Real Estate Investment Trust is focused on the acquisition, ownership, management and repositioning of strategically located, income-producing, multi-residential properties.
The bottom line
If investing in home-building and rental stocks sounds like it’s up your alley, it’s important to remember the market is still subject to market volatility.
As such, don’t put all your eggs in one basket. In other words, ensuring your portfolio is diverse is key, and choosing companies that fall in line with your values, among others, is important as well.
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