REAL ESTATE LONG TERM INVESTMENT?

I have been receiving email updates from Warren and this one really captured my attention.  With all the talk about the real estate market going down I think everyone is remembering the last decade or so and not remembering what it was like in 1989 when the market took a big turn.  With everything that is being said in the news about the real estate market today the information below really puts it into perspective.  We are not in a down market but in a normal market where is takes 60 days to sell a home.  See if what you think compares. Its been very good, right?
 
Lets take a look at 10 year periods, starting with 1985 to 1995. Then 1986 to 1996, 1987 to 1997, and so on, up to 1999 to 2009. In total there are 15 "decades" for us to review.
 
In considering these 15 "decades":
   
    In how many decades did the value of the average Single Family Home in the GTA: 
  1. increase by 100% or more?
  2. increase by more than 50%?
  3. increase by 50% or less?
  4. decrease?
The answers are given below but take a guess before you look.
 
A "decade" is typically thought of as "long term" when speaking about returns on investments. These time periods are important to all investors but especially important to those age 55 or older. In fact, the ten years before retirement are absolutely critical for most people, with little time to recover from losses or, to make up for weak returns. The next most critical decade is the first ten years of retirement when income is being taken from investments and thus exacerbates weak or negative returns.
 
For most Canadians, their home represents a significant amount of their wealth and increasingly they expect to use some of their equity to provide for a portion of their income in retirement. In fact, recent polls indicate that 60% of Baby Boomers expect to downsize their homes in the next decade as part of their retirement income plan. 
 
The coming decade will see an ongoing increase in the number of homeowners downsizing. Unfortunately for them, demographics indicate there will be an ongoing decrease in the number of "move up" homeowners. This does not bode well for home values.
 
So, speaking of values, how did you do on the questions about the past 15 decades?
  1. 100% or more:   None - the highest increase was 86.1% in the decade from 1985 to 1995
  2. More than 50%: Six - or 40% of the decades under review
  3. 50% or less:      Nine - or 60% of the decades under review
  4. Losses:             Three - the biggest loss was 16.6% in the decade from 1989 to 1999
How did you do? (a chart of the 15 decades under review may be found below)
 
For those approaching retirement, it is now possible to guarantee an annual increase of 5% in their future income. In looking back and, in looking forward, this seems pretty attractive.
 
Warren J Huntley
Financial Advisor
Retirement Income Specialist
Braley Winton Financial Group
(905) 815-1035  Office
(877) 372-9022  Toll Free
 
 
  

 

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Mary Kay McCoy

Mary Kay McCoy

Sales Representative
CENTURY 21 Dreams Inc., Brokerage*
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