While plenty of people relish the thought of a chunk of quiet vacation property all to themselves, the Canadian cottage market is likely to continue to suffer as a casualty of the ongoing tariff wars between the United States and Canada. The iShares S&P / TSX Capped REIT (TSE:XRE) shrugged that off, though, as shares rose fractionally in Monday morning’s trading.
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A recent report from ReMax Canada detailed that the Canadian cottage market had already seen a “..quieter than normal spring market,” and that silence was likely to persist. ReMax president Don Kottick noted that both recreational and traditional residential properties were already in open decline, and both buyers and sellers were likely to hold their current positions without a lot more “clarity” in the market.
Of course, it is not only tariffs that hold up the market. Factors like wealth transfer from Boomers to younger generations, changing rules of work, and rules connected to short-term rental properties are also having their impact. But the tariffs are likely the biggest restraining factor going forward right now. There is also an impact on prices, as ReMax looks for a 1.8% jump in prices for recreational properties.
Why Not Canada?
But there are some signs that the tariff concept may be on its last legs. With recent word out that China has made at least a temporary trade deal with the United States—a deal that has sent a range of Chinese stocks from Alibaba (BABA) to Nio (NIO) on the rise—it is clear the US is willing to talk. So can the “uncertainty” in the market be that much longer-lived?
There are some mitigating factors, of course. Canada and the United States already have one trade deal in place, the USMCA deal. So any future trade deals have to be considered in light of that. And certainly, the recent election did distract from other government business by sheer necessity. It would be impossible to set up a new trade deal with the United States when the government that set it up might have been tossed out the next day. So suggesting that the Canadian / United States trade tensions may not have long to live is not out of line.
Is the iShares S&P / TSX Capped REIT Index ETF a Good Buy Right Now?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on TSE:XRE shares based on 14 Buys and three Holds assigned in the past three months, as indicated by the graphic below. After a 2.23% loss in its share price over the past year, the average TSE:XRE price target of C$17.40 per share implies 16.52% upside potential.
