Tempted by quick real estate profits? Not at the expense of your retirement
Canada’s red hot housing market has tempted many to abandon their long-term perspective and to try to sell, flip or invest to turbocharge their wealth. Don’t let short-term thinking and profit chasing throw you off a well thought out retirement strategy. Need a reality check? Keep these factors in mind:
Equities outperform over the long term. Historically, equities have provided average annual compound returns superior to the returns of any other asset class, including real estate. In one recent example for the period between 1993 and 2017, the TSX Composite Total Return Index provided a return of 9.0% versus 5.5% from the hot real estate markets of Toronto and Vancouver and just 4.7% based on the national average of real estate values.1
Market timing can work against you in real estate too. House prices can go up or down, and there’s no guarantee you’ll receive top dollar when you’re ready to sell.
Moving costs money. Many additional costs are incurred when selling property. Real estate fees, legal fees, land transfer taxes, and moving costs can all take a chunk out of your profits from the sale. If the real estate frenzy has you questioning your retirement or other investing strategies, be sure to talk to us for some perspective before taking action.
1 RBC Global Asset Management Inc., with real estate information from the Canadian Real Estate Association (CREA). Data as of January 31, 2018.