My Financial Tips

As an observation to the last recession in the housing market in Canada, REMAX Canada released a report analyzing the local Canadian housing markets over the last 30 years. The conclusion of the report is clear - bricks and mortar have been one of the most protected ways of investing in Canada over the past three decades.

The Regional Executive Vice President, Elton Ash expresses in the report that real estate analysts are still taken by surprise at the strength of the residential real estate market. There have been three big slumps in the Canadian real estate market over the last 30 years, two of them were in the 1980’s and the most recent in 2008. Prices and sales have been increasing up for 6 months making the downturn in 2008 the shortest one ever. The real estate market no longer rewards the buyer, more people are using leverage to finance real estate investment.

The Canadians’ have a traditional belief in houses and condo investments leading to various rationale why this is a long term investment plan. Real estate embodies monetary and material “fortresses” for a lot of Canadian investors. Home ownership has expanded from 62.1% (in 1981) to 68.4% of the entire population. With a 12% increase, Calgary has observed an even bigger increase in property purchase.

Despite the above communicated downturns and smaller changes, real estate remained a very well appreciating investment, with Vancouver, Victoria and Toronto as forerunners in terms of price appreciation. In the first eight months of the year Greater Vancouver has seen an a growth of 14% sales and is the pioneer in this years real estate market. Motivation is coming from those buyers that are trading up but the most meaningful increase is by the first time buyer.

Anyone that has been observing the real estate market will know that the highest price increases are in Vancouver.

In the last three decades Canadian real estate prices have grown a 366.4%, but Vancouver has seen an even greater rise at a whopping 473.7%. Home ownership increased from 58.5% to 65.1% during almost the exact period (since 1981). If you examine at the rate of inflation over the same time frame you can see the disparity. Using the Bank of Canada inflation calculator, it reached 156.6% for the equivalent period. In other words: investing $100,000 into real estate 30 years ago would bring you just about $320,000 net return.

It seems that Canadians are aware of this information. In a very up to date Survey by The Angus Reid Omnibus, nearly 80% of respondents put real estate investment over stock investment.