Why housing is still the best investment for most Canadians.
With an upturned economy and uncertainty still on the rise, many Canadians are concerned about protecting their largest investments: their homes. The warning issued by the Canada Mortgage and Housing Corporation (CMHC) contributed to the widespread unease; as a result of the pandemic, the average price of homes could decrease from anywhere between nine and eighteen percent. Experts predict that the housing market will not reach pre-pandemic levels until late 2022. Big cities like Toronto and Vancouver may find themselves particularly vulnerable to the effects of this downtrend.
The CMCH states that, on average, the value of Canadian homes has increased by over five percent annually over a twenty-five-year period dating back to the 1940s. While longtime homeowners experienced the benefits from the pre-pandemic housing boom, new homeowners can take comfort in the knowledge that any damage caused by the predicted market decline over the coming three years will be easily absorbed and remedied once it gets back on track. Prospective homeowners, however, stand to benefit the most from these shifts. This three-year period has the potential to create an opening into a very affordable residential market, as the once prevalent threat of higher mortgage rates has been diminished by mass government spending.
When considering investment risks, the real estate market tends to be a safer bet than most. Because homes are bought and sold far less regularly than stocks, the risk of price decline and significant losses is much lower by comparison. The inherent value of the real estate, however, is incomparable. A home, something tangible and real, will forever hold value, unlike many other equities that depend on investors’ ever-changing beliefs and opinions. An investment in residential real estate is similarly unique in that it is one you can physically and immediately enjoy; that is to say, you can live in it. While there is always the potential for the value of your home to increase over time, it can also generate additional profit through rent opportunities. Owning a home is also a great way to build equity. By borrowing at a low interest rate in the form of a mortgage, an investor can use the property as collateral for future endeavours.
As long as the demand for shelter exists, the real estate market will thrive. While we may be spending more time in our homes than ever before, the demand remains high and opportunities plentiful for homeowners at every stage.