I wrote an article about investment diversification for my friends over at Canadian Budget Binder. Read here: Understanding Investment Diversification.
I suspect some people are going to take it the wrong way and think I am suggesting that buying a home to have a safe place to raise your family is a bad idea. If you can make a decent down payment, plan to live there for the next 10 years and can honestly say that you wouldn’t be stressed if real estate values dropped 10-30% over the next few years, then I say go for it.
This isn’t a site about real estate, so I don’t really want to debate the issue too much, but these stats scare me:
- 70% of Canadians now own real estate (the highest level in history created by artificially low interest rates).
- Only 53% of Canadians say they have a long term investment plan for their retirement. (source CTV News)
- The market will be flooded with houses by the year 2030 as retiring baby boomers down size. (source CNBC)
- Toronto is building more condos than New York or Chicago and the buildings are already starting to fail. CBC News – Throw away buildings.
- In 1980, the ratio of household debt to personal disposable income was 66%; that ratio recently passed 150%. (source Stats Can)
So, I think houses are great to own, but I think people would be well advised to diversify into other types of investments if they want any real growth over the next few years.