S&P TS&P Real Estate Index falls 1% amid inflation bets

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S&P TS&P Real Estate Index falls 1% amid inflation bets

In its fourth week of losses, the S&P TSX Composite Real Estate Index fell 1 per cent, for its fourth week of losses amid rising bets of interest-rate hikes at the Bank of Canada and the Federal Reserve to curb rising consumer prices. We apologize for the video, but it didn't load.

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At the end of October, the Bank of Canada said it could increase interest rates as early as spring to combat inflation, putting pressure on borrowing and constructions costs. In November the alarm on inflation started to sound, according to a phone interview by Bank of Montreal analyst Jenny Ma. That started to give investors pause. Canada's most valuable mall is getting apartment buildings.

Some of the largest real estate investment trusts or REITs are weighing on the sector. The Canadian Apartment Properties REIT, known as CAPREIT, fell 5.9 per cent in the month of November, its biggest drop in more than a year. The concerns surrounding the Omicron variant have dragged on retail and restaurant REITs, such as RioCan Real Estate Investment Trust. The shopping centre property owner fell by 4.7 per cent in November, its biggest monthly drop since September 2020. Allied Properties Real Estate Investment Trust, which owns office space, lost 3.6 per cent last month. The rising rates may not necessarily plague real estate firms until 2022, according to Ma. As the economy rebounds, and people return to the office and start dining and shopping, developers and property owners could see a boom from spiking activity. The sector is still outperforming this year, gaining 26 per cent compared to the S&P TSX Composite Index, which climbed 18 per cent. Ma said that the REITs have been to hell and back with the Pandemic, so they have seen how they hold up in the worst of the worst of the worst. With the absence of Omicron causing restrictions, this would be an opportunity for investors to increase their positions in the REITs where they see growth.