Appreciating your house.

Long-term homeowners see big profits

By Meagan Fitzpatrick
CanWest News Service
Wednesday, January 24, 2007

OTTAWA — If you bought a house 25 years ago and have stayed put since, you made a wise investment, according to a new study that found the average price for a Canadian home appreciated 264 per cent since 1981.

An analysis of 17 housing markets across the country by Re/Max real estate company released Wednesday found that the average price of a home in Canada rose 5.3 per cent annually on a compounded basis over the 25-year period studied, rising from $76,021 in 1981 to an estimated $277,000 in 2006. On a non-compounded basis, prices rose 11 per cent annually.

The study shows that Canadians who poured their savings into a house 25 years ago are getting a very solid return on their investment, said Michael Polzler, executive vice-president and regional director of Re/Max for Ontario and Atlantic Canada.

“What we see is that Canadians like home ownership. It’s very predictable,” he said in an interview. “They see it as a logical, long-term investment.”

It’s also one you can live in, he added.

“Everybody has to live somewhere, you can’t raise your family in a mutual fund and because of that, there’s always going to be that demand for housing and traditionally real estate has always appreciated,” Polzler said.

Barrie, Ont., a small city located about an hour north of Toronto, led the way with a huge jump of 372 per cent between 1981 and 2006. The compounded annual rate of return for Barrie is 6.4 per cent.

Price appreciation topped 240 per cent in seven other Canadian cities including Ottawa (297 per cent), Montreal (292 per cent), Greater Toronto Area (290 per cent), and Greater Vancouver Area (242 per cent). Victoria reported a 229 per cent jump and Calgary was up 227 per cent.

The top seven markets experienced an annual compounded rate of return ranging from five per cent to 6.4 per cent.

The report highlights several factors that likely contributed to the gradual rise in housing values in Canada. Number one is a 25 per cent increase in Canada’s population over the period studied.

The report also said greater economic diversity in many regions of Canada has increased housing demand and therefore pushed up prices.

Alberta has done well to attract major corporations, for example, Saskatchewan shifted its economic base from agriculture to natural resources and the addition of the high-tech sector to Ottawa played a big role in the health of its residential real estate market, the survey said.

Immigration is another influence, and baby boomers have also been a powerful driver behind housing demand, according to Re/Max. Canadians in that demographic have not only been buying their own homes or retirement properties, but also helping their children to buy their own homes.

“It’s very common that you see the baby boomers helping with the down payments, sometimes more than that,” Polzler explained.

He predicts housing values will continue to climb over the coming year and in the foreseeable future. His advice to younger Canadians is to buy now and reap the rewards later in life.

“You have to live somewhere. You’re paying for your lodging either way so it makes sense to have that as a primary investment strategy,” Polzler said.

The survey used data from real estate boards in the cities included in the study. Of those surveyed, Vancouver was the city where it was most expensive to buy a house last year. The average price was $509,876, making Regina look like a bargain where the average house went for $131, 851.

Average price for a residence in 2006:

- Canada $276,824

- Vancouver $509,876

- Victoria $400,000

- Calgary $346,673

- Edmonton $250,915

- Regina $131, 851

- Saskatoon $160,577

- Toronto $351,941

- Ottawa $257,481

- Montreal $215,659