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Dale Jackson

Personal Finance Columnist, Payback Time


Canada Mortgage and Housing Corporation President and CEO Evan Siddall told BNN Bloomberg this week that Canadians should stop glorifying homeownership as a vehicle for savings, warning the “party ultimately comes to an end.” For most Canadians, that is simply not true.

Sure, pockets of Toronto and Vancouver’s real estate markets are frothy but the overwhelming majority of long-term homeowners in the rest of the country can likely look forward to a decent return on their investments in retirement. Economists with the CMHC have even pointed out that, on average, Canadian residential property values have increased by more than five per cent each year on a 30-year moving average. That means one or two negative years for property values would be wiped out by other years of positive values.

Canadians outside major urban centres are being misled by big-city-centric views of the real estate market. They are also being misled by antiquated views of retirement savings.

Guaranteed defined-benefit pensions have given way to defined-contribution pensions, where retirements savings are exposed to the whims of broader equity markets. Residential real estate values tend to hold steady in times of market volatility. Each time U.S. President Donald Trump plays Twitter games with the global economy and throws equity markets into a tizzy, it’s another sleepless night for Canadians with defined-contribution pensions.      

The most prudent retirement savings plan includes homeownership as only part of an investment portfolio. But here are four ways a home is a good investment:                

1. Residential property values generally appreciate over time and are at the very least a good way to store value.

2. Capital gains in a principal residence are never taxed, much like a tax free savings account.

3. A home can be used as collateral to borrow through a home equity line of credit.

4. A home can help generate rental income and can save homeowners from not having to rent (allowing them to diversify their investments).