Why We’re Bullish on Real Estate—Even in a High-Rate Market
Rising Interest Rates: A Challenge or an Opportunity?
The rapid rise in interest rates has caused many investors to hesitate when considering real estate. Central banks adjust rates to control inflation, but mismanagement during the COVID-19 crisis led to extraordinary rate hikes, creating volatility in capital markets and increasing borrowing costs. Ironically, higher interest rates can even push inflation higher by increasing the cost of necessities.
With this uncertainty, should investors wait on the sidelines?
Why We’re Betting on Real Estate
Despite market fluctuations, real estate has historically delivered high risk-adjusted returns, low volatility, security, and steady cash flow. That’s why it makes up around 25% of major pension fund portfolios and remains a key asset class for ultra-high-net-worth investors. We firmly believe real estate should be seen as a long-term investment—and today’s market presents attractive entry points.
Multi-Family Residential: A Strong Investment Play
Real estate is a broad category, with valuations varying across asset types like single-family homes, commercial spaces, and industrial properties. Right now, we see the strongest opportunity in multi-family residential properties in high-growth regions.
What’s Driving Our Confidence?
Canada’s population growth continues to outpace available housing, creating a persistent shortage that is driving up demand. At the same time, much of the country’s existing apartment stock has suffered from years of underinvestment, making it less appealing and further limiting supply. Despite economic uncertainty, multi-family rentals have consistently demonstrated strong market stability, providing reliable cash flow and security for investors.
Some regions, such as Langford, BC, have experienced remarkable growth, expanding by 50% over the past decade. This rapid increase reflects the sustained demand for rental housing and highlights the long-term investment potential in well-positioned markets.
Where Waverley is Investing
To capitalize on these trends, Waverley is actively financing multi-family developments in key growth markets. In British Columbia, we are involved in projects in Langford and Surrey, two areas experiencing rapid expansion. Meanwhile, in Ontario, we are supporting developments in Waterloo, Oakville, and North York, all of which are well-positioned for continued growth.
In addition to these projects, we are collaborating with the Scott McGillivray Real Estate Fund to establish a residential development pool across Southern Ontario. Furthermore, one of our issuers has introduced an innovative equity-sharing rent-to-own program, designed to provide a unique pathway to homeownership while offering strong investment potential for Waverley clients.
Apartment REITs: A Smart Investment Strategy
Beyond direct development investments, Waverley also offers access to high-quality apartment Real Estate Investment Trusts (REITs), which present attractive opportunities for investors. These funds deliver high risk-adjusted returns while providing steady cash flow and liquidity options. They also offer tax-efficient investment structures, making them a compelling choice for those looking to diversify their portfolios.
By acquiring and improving existing apartment properties, as well as developing new housing projects, these REITs are actively contributing to the much-needed expansion of Canada’s rental housing stock. With strong balance sheets and a strategic approach, our fund partners are well-positioned to identify valuable opportunities in the current market, ensuring long-term growth and stability.
The Bottom Line: Real Estate Remains a Strong Bet
While the market may seem uncertain, history tells us that real estate remains one of the most stable, rewarding asset classes. Our advice? Look for supply-demand imbalances, partner with experienced developers, and seize today’s market opportunities.
— Don McDonald, 2024
