Here’s a reader question that captures the way a lot of people think about real estate as an investment, especially in big cities. “My husband and I have a block of cash – not enough to buy real estate here in Toronto where we live. How else can we invest with similar returns?”
Good news – getting similar returns to real estate is easy right now. Toronto home prices gained 1.6 per cent on average in February compared with the same month last year. A high-interest savings accounts could have made you 2.3 per cent over the past 12 months, with zero risk. In Vancouver, prices fell nearly 10 per cent in February. Across the country last month, average prices fell 5.2 per cent on a year-over-year basis.
Real estate has without question been a good long-term holding. The average house price in Canada has gone up about 5.4 per cent annually on average since 1990, figures from the Canadian Real Estate Association show. The past several decades have been a time of steadily falling interest rates – that’s a huge support to house prices. But with rates close to the bottom now, future prospects for house prices have to be tempered.
One final note: Houses have a tax advantage over conventional investments made outside registered accounts such as RRSPs and TFSAs in that you can sell a principal residence tax-free. Here’s aAre you reading this newsletter on the web, or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money
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