Real Estate

Average real estate return

According to the National Association of Home Builders, the average price for a new home in 1980 was $76,400. In 2005, the average was $295,100.

That’s incredible! $218,700 in caaash …
Before you get too excited thinking about investing in real estate and flipping houses, ponder this: Over a 25-year period, that $218,700 gain comes out to a 5.6% annualized return.

Taken from: What happens when the boom goes bust

This is holding true for us, 5% is about the rate at which our condo has been appreciating every year since we bought it in July 2004. Overall, I’m of course happy that we have at least some kind of real estate, but I’m a bit disappointed in such modest price rise. Condo price increase has been very moderate so far, and like the last Remax newsletter put it, “Waterfront condos in Croatia are more expensive than waterfront condos in Toronto!”.

That’s especially really surprising, considering that in a lot of smaller Ontario towns real estate is expected to boom. Is Toronto not attractive to the newcomers anymore?

“If I were to invest in the country, I’d say Barrie and the Kitchener- Waterloo region would be my two top choices,” said Don R. Campbell, president of the Real Estate Investment Network and author of several books.

Mr. Campbell, who has studied Canadian markets for 15 years, said, “There is a shortterm slowdown in the [Ontario] economy but the fundamentals are strong and investors should invest today so they can benefit from good returns in 2008.”

While the rate of return so far is not impressive, it’s comforting to know that we won’t have to pay any taxes on any gain from sale of the condo.