Baby boomers and immigrants drove prices
Ashley Ford
Province
Residential real estate has proven a solid investment for Canadians over the past 25 years, according to a study released yesterday by national real-estate company RE/MAX.
The bare numbers show homes in Vancouver increasing in value by 242 per cent, in Victoria by 229 per cent and nationally by 264 per cent over the past quarter-century.
The average home in Vancouver in 1981 cost $146,861. At the end of last year it cost $509,876.
“Conventional wisdom used to be that real estate was a relatively safe, long-term investment that typically appreciates at a rate of five per cent annually,” said Michael Polzler, RE/MAX’s regional director for Ontario-Atlantic Canada.
But whether housing has outperformed other investments is another matter.
Tsur Somerville, an associate professor of strategy and business economics at the University of B.C.’s Sauder School of Business, said the RE/MAX numbers make interesting reading, but there’s “lots of muddying of the waters.”
The survey results should be treated as general information, he said.
“You have to be careful with numbers like these because 25 years ago the average house was not the same as it is now,” he said.
“And one would expect any place where there are rising incomes and a growing economy to show a rise in house prices.”
Further, Somerville said, the RE/MAX study does not take inflation into account.
Over the 25-year period, inflation rose 138 per cent, and that has to be subtracted from the percentage increases.
By comparison, he said, the Toronto Stock Exchange rose 397 per cent over the same period. Inflation must be subtracted from the exchange’s performance as well, he said.
However, Elton Ash, regional vice-president, RE/MAX Western Canada, said “the results are nothing short of remarkable, given the economic volatility of the marketplace in the past 25 years.
“This is especially true in recent years, when serious external factors such as 9/11, SARS and an outbreak of forest fires barely registered on housing activity.
“Any one of these disasters would have had a significant impact on real-estate markets in the 1980s.”
Canada’s growing economic diversity insulates many markets against shocks, RE/MAX said.
The buying power of baby boomers and immigrants has been a big force in driving house prices higher, RE/MAX said.
Topping the price appreciation parade was Barrie, Ont., with a 372-per-cent increase.
The company’s analysis of 17 cities found price appreciation topped 240 per cent in seven areas: St. Catharines (329 per cent), Hamilton-Burlington (325 per cent), Ottawa (297 per cent) and Greater Toronto (290 per cent).
Oil-rich Calgary was up only 227 per cent.
On the bottom rung were Regina at 140 per cent, Saskatoon at 148 per cent and St. John’s at 153 per cent.
The strength and stability of the Canadian housing market is convincing lenders to become more flexible. Mortgage Intelligence Inc., a GMAC company, has just announced it will offer 40-year mortgages.
“Consumers are increasingly telling us they want a mortgage that gives them flexibility in its terms, length and payment options, the ability to get into the residential market and the freedom to meet other financial demands,” GMAC senior vice-president John Schipper said.
© The Vancouver Province 2007
