The Canadian housing market continues to be a hot topic in real estate circles as homeowners continue to keep a close eye on the current trends in the market. While skeptics continue to warn that a bust may be on its way in the near future, most real estate analysts have a more optimistic view on the housing marketing, especially when it comes to larger cities like Toronto and Vancouver.
Return on Homeowners Invested Predicted to be Two Per Cent
Recent reports are suggesting that Canadians will not see how much of a return on their investment as in previous years. According to TD economics, they predict that homeowners are likely to yield only a two per cent return on their homes over the next decade, which is down significantly from the performance in the past two decades.
This news has many homeowner concerned. For most Canadians, their home is their biggest investment. Obviously, they want to maximize the return on their investment. However, a predicted two per cent return on their investment at home would put most people in line with the current rate of inflation.
If you look at the big picture, investing in real estate, even if your rate of return is two per cent, is still a sound investment. The truth is, a rate of two per cent return on your investment is still a better rate of return when compared to most investment options.
Why the Low Prediction?
The prediction of a lower return on real estate investments is based on a number of different factors. They include:
Slowing economic growth
Tighter mortgage rules
The prospect of higher interest rates
An aging population that is less likely to sell their home
- New immigrants taking longer to become home owners
Each one of these factors has all dampened the outlook of the housing market. But, if you take a closer look, it appears that the housing marketing will continue to grow, prices will rise and demand will remain constant in some of Canada’s largest cities.
Toronto and Vancouver Continue to Bump the Trend as Prices Expected to Rise
Despite the reports of lower return, residential real estate in Toronto and Vancouver will continue to do better than the national average, as will other larger Canadian cities. Both cities have experienced a rate of return of more than six per cent over the past thirty years, with Toronto’s average rate of return on real estate being six point one per cent and Vancouver’s average rate of return on real estate being six point four percent. Expect this trend to continue into the future as the demand for residential real estate in these areas will continue.
It is understandable that many people are worried about the value of their home in the future. Making sound investment is an important part of your financial future. The good news is that you should expect housing prices to increase, especially if you live in a large urban area.
This situation points back to one of the main principles in real estate – location, location, location. Where you invest in real estate location cannot be overlooked and future homeowners need to give more thought to where they buy. It could be one of the determining factors in how much of a return they can expect from their residential real estate investment.