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Purchasing a home is one of the best
financial decisions you can make. It can provide you with a sense of security
and safety not found in most other investments. You also get the benefit of tax
free capital gains on your primary residence if you ever have to sell.
Vancouver is a wonderful
place to live (especially on the west side!). But real estate is very
expensive. The rise in prices over the past 10 years has put many people out of
the market, and at the same time, it has made many others millions of dollars.
Even as other Canadian cities and
cities around the world have experienced significant price drops in real estate,
Vancouver seems to be holding its value nicely.
I recently came across some information that surprised me. I’ve provided a few charts comparing
Vancouver real estate to the equity markets. The difference in performance is
amazing.
The comparison is from January 1977 –
September 2009. An $80,000 detached home is now worth $872,116. An $80,000 investment in the
Canadian equity markets (TSX) would be worth $2,389,539! A difference of $1,517,423!
Keep in mind that this chart does not
take into account leverage. The retail investor can’t buy a $1,000,000 equity
portfolio with 5% down ($50,000) like you can do to buy a house. But the return
differential is very surprising.
These prices are only up to September
2009. Real estate in Vancouver is up from that time but so are the markets. The
TSX is up about 1000 points over September 2009 (including today’s big loss).
The gains over real estate would probably be even higher.
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