Condos Worse Investment than REITs

Toronto Condos by Gregalicious

There has been a great deal of discussion and argument regarding the profitability of a decision to invest in a condo versus owning an apartment real estate investment trust (REIT) these days. Now it seems that the debate could be settled for a while, as Macquarie Capital Markets Canada issued a report showing that REITs did better than condo investments in both Calgary and Toronto, with higher profits and significantly more stable prices during the time period of 2008-2010.

“If you’re going to buy a condo for an investment, I think ... it’s better to buy the REITs,” advises Michael Smith, the Macquarie analyst who carried out the comparison research. Furthermore, most investors are focusing on building new condos, which pushes the potential yields of REITs even higher.

The weak point of the report is the fact that it uses way too small a sample size, both in terms of the size of the researched area and the number of years included, to determine its conclusions. Bearing this in mind, the report’s findings are far from universally accepted.

Whatever the final result of the debates, real estate generally remains a good investment. However, it is also important to remember that the appreciation of a property is never real until it is converted into money by selling the property.