Bricks and Mortar: A Solid Investment

As an answer to the latest recession in the housing market in Canada, REMAX Canada published a report analyzing the local Canadian housing markets over the last 30 years. The conclusion of the report is simple - bricks and mortar have been one of the safest ways of investing in Canada over the past three decades.

“The strength of the residential housing sector cross-country has taken many economists and housing analysts by surprise once again,” says Elton Ash, Regional Executive Vice President, RE/MAX of Western Canada. Truly, over the last three decades Canada has endured three big real estate downturns in the years 1981, 1989 and 2008. The most recent one was the shortest ever, with sales and prices going up for almost 6 months now. Buyers have lost their market, which has now turned into leveraged or even a sellers' one.

Long term soundness of real estate investments is based on several factors in Canadians traditional belief in houses and condos. Real estate represents financial and material "fortresses" for most Canadian investors. Home ownership has increased from 62.1% (in 1981) to 68.4% of the entire population. In some regions it is higher than that, for example, Calgary 74.1%.

Despite the above mentioned downturns and smaller fluctuations, real estate remained a very well appreciating investment, with Vancouver, Victoria and Toronto as leaders in terms of price appreciation. The Greater Vancouver Area has been the leader of this year's market rebound with 14% sales increase from January until August. The main buyers are represented by first-entry purchasers, however the over $1 million segment is also being stimulated by trade-up buyers.

Those who have kept their eyes on the resale market for some years shouldn’t be surprised – Vancouver is the best performing market in Canada, in terms of real estate prices appreciation!

Since 1980, the average price of property in Vancouver rose 473.7% while the average price in Canada reached 366.4%, from $100,065 to $574,061. Home ownership rose from 58.5% to 65.1% during almost the same period (since 1981). Just compare this with inflation for the same period. According to the Bank of Canada inflation calculator, it reached 156.6% for the same period. In other words: investing $100,000 into real estate 30 years ago would bring you almost $320,000 net return.

It seems that Canadians are aware of this fact. According to The Angus Reid Omnibus Survey (conducted on September 15), 77% of respondents in Canada preferred investing in real estate instead of stocks.  

Whole Bricks&Mortar report.