Owning a home remains the largest single investment for most Canadians so it’s not surprising that the fear of an economy turned upside down hits home for many.
The Canada Mortgage and Housing Corporation (CMHC) recently warned the pandemic, and resulting lockdown of the economy could drive Canada’s average home prices down by 9-18%. As job loss and uncertainty forced many Canadians to the sidelines, the federal housing agency expects the housing sector will not return to pre-pandemic levels until the end of 2022.
Most of the concern centers on oil-producing regions hit hard by the crash in crude prices. Housing analysts also point out vulnerability in big cities such as the booming Vancouver and Toronto condo markets.
That’s potential bad news for speculators or those who just bought a home in a vulnerable region and want to sell in the next three years. For most long-term homeowners who can maintain a sufficient source of income, the best and safest investment remains the roof over their head.
According to the CMHC, average Canadian house values have increased by over five percent annually over 25-year periods going back to the Second World War. That includes the 2008 global financial meltdown when predictions for a housing market collapse never materialized.
Many homeowners have already benefited from the pre-pandemic housing boom, and for new homeowners, any decline over the next three years can easily be absorbed once the market gets back on track.
For potential homeowners, the next three years could finally open an affordable window to the residential real estate market.
While a home should never be the only investment in a retirement portfolio, it’s unique from other investments in terms of risk. Other equity investments have intrinsic values, but they can be difficult to measure consistently in relation to their price. Bitcoin, for example, has no intrinsic value because it is backed by nothing. The only value in bitcoin is a belief by investors that it has the intrinsic value of its trading price.
Real estate is the only investment you can actually live in. It’s an asset you can rest your head in it at the end of the day no matter what value the market places on it. In addition to the potential for it to go up in value over time, a home pays a sort of dividend equal to the cost of rent, and upon sale, it’s the ONLY investment where you pay no tax on the gains!
Homeownership also allows average investors to build equity by borrowing at a low-interest rate in the form of a mortgage by using the property as collateral. Over time, that equity can be used to borrow to fund lifestyle, build a portfolio or investment or properties, or fund a business or help a loved one financially.
Perhaps the biggest and hardest measure of the intrinsic value of a home to quantify comes from its newfound role as a sanctuary during a global pandemic. The value of a home in a time when social distancing could become the norm for years to come is immeasurable. Being cooped up with the people closest to your heart can be frustrating at times but can offer rewards well beyond its market value.
Although the economy has been turned upside down there will always be an economy as long as there is a demand for something. Investment trends may come and go but the desire to own a home will always drive demand.
Angela Calla is a 16-year award-winning woman of influence and mortgage expert. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. She educates and empowers individuals on the “The Mortgage Show”, which she’s hosted for over a decade and is the best selling author of The Mortgage Code available on Amazon. All proceeds from her book sales are donated to Access Youth Outreach services, a local charity in our community supporting our youth.
Angela leads by example with passion and conviction. She is known as an industry expert on TV and radio and the go-to source for publishers across the Country. On top of all her achievements, Angela finds the time to be a loving wife and mother of two beautiful children.
For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at callateam@dominionlending.ca or 604-939-8777.
