26 April 2011

“I’m not saying we’ll see a great correction soon, but I think there will be a long period of moderate changes in house prices – plus or minus 2%,” – Mr. Dunning said.
It means that buying a house and living in it for ten years or more will protect you from temporary market declines. The same scenario works at the stock market, where long-term investing can smooth out the stock market’s rises and falls. But still, those who bought a house in Toronto in 1989 at the market peak and haven’t sold it, will see a modest annualized gains of just about 2%. It worth noting that real estate performance is very local and you market can outperform market in Windsor for example.
It should be noted that houses bought today may turn out to be quite a weak investment in the immediate future, but there are still some reasons to think of. Paying off your mortgage can become a saving plan. And, of course, owning a house gives you freedom. It’s your home, your family and your own life style.
Here is an approximate table of different investments over the 10 years to March 31 with the average annual returns.

Houses (Average resale housing price in Canada) 8.30%
Stocks (S&P/TSX composite index with dividends included) 8.90%
Bonds (DEX Universe Bond Index) 6.10%
T-bills (91-day Treasury Bill Index) 2.60%
Gold bullion (per ounce, in U.S. dollars) 19.10%

This article is not intended to serve as an investment advice. Past performance does not guarantee the future results.

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