Good news for REITS, bad news for brokers

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The lower interest-rate environment and economic growth in Western Canada should prop up an increasingly iffy real estate market, but not necessarily for brokers, according to a recent report by credit ratings firm DBRS.

“We expect credit risk profiles of the REITs/REOCs (we rate) to remain stable going forward despite the persistent uncertainty with respects to the global economic outlook,” DBRS said in an assessment released last week. “This view is supported by the low interest rate environment, generally limited supply in each real estate subsector and above average fundamentals for the Canadian economy (particularly the western region of the country).”

The opinion used to affirm positive ratings for Canadian REITs, among other real estate investment securities, is largely viewed as a barometer of apartment and office building occupancy rates. Both of those markets are now benefiting from some of the highest figures in years. That’s only expected to grow as the number of prospective homebuyers dwindles because of tighter mortgage qualifying rules.

A strong rating for REITs is actually a strong indication that the homebuyer end of the market may slow in the short- to mid-term. That’s decidedly bad news for brokers, already facing a slowing market.

Still, there is some reason to be hopeful.

On Wednesday, the Bank of Canada announced that it will maintain its overnight rate at 1 per cent, making it likely variable, if not fixed rates, will remain low – helping lure some buyers.
 

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