The ongoing real estate versus equities debate, why you should sell Berkshire, and five charts that tell us where the markets are going next

Over the past five years, the Teranet-National Bank Housing Index increased 38.7 per cent and the S&P/TSX Composite Index climbed 30.6 per cent but the relative merits of real estate versus equity investment is a far more complicated question than these simple numbers tell.

Interest rates are the biggest swing factor in home valuation over shorter periods – low mortgage rates put significant upward pressure on real estate prices. It is unlikely that domestic rates will climb substantially in the near future, but Canadians planning for the long term should note that borrowing costs have been declining for 35 years – boosting home prices – and don’t have much room to decline.

The column deals with global and U.S. findings. Applying the same logic to Canada specifically carries important implications. The domestic equity market is commodity-heavy and lacks anything like the S&P 500’s degree of sector diversification. This makes Canadian equities far more volatile, and the odds of real estate outperforming equities in risk-adjusted terms is far higher than south of the border.

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