Is It Time to Leave The REIT Sector or Hold On for A While?

REITs have been recording all all-time highs, and the question that most real estate investors are asking is whether it is the right time to leave the sector or to hold on for just a little longer. Due to rising bonds, the publicly traded real estate sector in Canada seems to be at its peak, and there is a group of investors who do not think any more growth is possible, and so it would be a good time to get out of the sector for good.

One observation worth making, however, is that interest rates in the real estate sector are known to rise, and investors are also known to look for more upsides in other places. OOne of the causes of the rate rise, is an improvement throughout international markets, which does not mean that there is any issue with REITs.

Over the last few years, it is only valuations, which tend to be working for the REITs. It is no secret that real estate stocks have been perceived as expensive in Canada over the past few years, having been one of the few alternatives for those who did not want to invest in mining and energy stocks. However, any pullback is likely to make the stocks cheaper and more accessible to aspiring investors.

Since stock markets boil with uncertainty and often react to sentiment as opposed to logic, the decision on whether or not to leave REITs should be carefully considered. Even with the pullbacks, there is still room for more growth and new all-time highs could be achieved.

In as much as it may or may not be wise to jump on board now, those already invested may consider diversifying their portfolios in other quality companies with strong growth signals. But focusing on the REIT sector as a sole investment may be tricky. REITs are generally at an all-time high, hence not just expensive, but also, a potential pullback may result in losing a good chunk of your profits and may even eat into the capital of relatively new investors.