Is real estate a good investment? Yes of course it is. But how good? The historical data is actually unbelievable.
Real estate is not suppose to be a vehicle for investment. A home is somewhere to live, to raise your family and to keep your stuff. It is however, a good investment. With house prices going up, up up the wealth of homeowners is increasing at a great pace.
I remember when a Coke costs five cents
Every year it seems I get the opportunity to sell a home or two that have been in the same family for decades. My current listing at 142 Brubacher has been owed by the same couple for more than fifty years! I joked with the sellers that they are bad for realtors – you’re suppose to move every 7 years, not every 70. And it is also fun to ask what they paid when they bought it. Today, $12,000 seems like small change, but I guess it was a lot of money back in the day.
A lot of wealth has been created through real estate. This story in the Toronto Star compared some actual listings from 1915 to 2015 reporting the asking price and the sold price along with the inflation-adjusted price. The increases are astounding. A house that was for sale in 1915 for $3,375 sold in 2012 for $612,500. The inflation adjusted price was only $67,611. If I could go back in time, I would certainly be buying as much Toronto real estate as I could afford.
The rich get richer and the poor get richer too
A recent story in the Financial Post argues that although richer people are reaping large benefits from the real estate boom, it is actually low-income Canadians that are seeing the most improvement to their overall wealth. From the article:
The bottom 20 per cent saw their average wealth increase 38 per cent to $109,300 from $79,500. However, for that segment of the population, real estate was responsible for 73 per cent of the gain and other assets accounted for 27 per cent.
The message is clear. Real estate is a great way to accumulate wealth.