Invest Well. Live Well: Real estate versus the stock market

Our grandparents lived in Vancouver, purchasing their home at West 36th Avenue and Dunbar Street in October 1951 for $10,500.

They lived there happily for many years, raising their three sons, hosting countless holiday dinners and building a legacy of memories. As our grandparents grew older and their health began to fail, they sold in 1996.

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What is that property worth today? The 2021 BC Assessment was an impressive $3,617,000. We found it noteworthy that assessment values peaked in 2018 at $4,896,000. The true market value can often differ. 

So, what does that return on investment look like? Well, from 1951 to 2021 — a 70-year period — we have calculated the annualized rate of return to be approximately 4.9 per cent. This does not factor in home ownership costs such as mortgage interest, insurance maintenance and property tax.  

RBC conducted research from January 1996 to December 2020, comparing real estate returns in several Canadian cities versus the Canadian stock market. Below are their returns:

Invest Well

How has Kamloops fared? According to crea.ca, as of March 2021, the current year-to-date average sale price in Kamloops has grown to $522,184. Going back to January 2010, it was roughly $315,000. That growth of $207,184 in just over 11 years equates to an annual return of six per cent — again, before any costs. According to blackrock.com, the total return of the TSX during the same period was 7.4 per cent, but this does not factor in investment costs. 

We often hear "You can't lose with real estate” or “Real estate is a better investment than the stock market." We like to remind all investors that: 

1. We believe owning a home is financially prudent.

2. Because a home is often one’s largest portion of their net worth, we encourage investors to diversify.

3. Historically the Canadian and U.S. stock markets have outperformed real estate

4. During certain periods, there can be over- or under-performance from any of these three assets

Until next time, Invest Well. Live Well.

Written by Keith Davis. This document was prepared by Eric Davis, vice-president, portfolio manager and investment advisor, and Keith Davis, investment advisor, for informational purposes only and is subject to change. The contents of this document are not endorsed by TD Wealth Private Investment Advice, a division of TD Waterhouse Canada Inc.-Member of the Canadian Investor Protection Fund. All insurance products and services are offered by life licensed advisors of TD Waterhouse Insurance Services Inc., a member of TD Bank Group. For more information, call 250-314-5124 or email Keith.davis@td.com.

Invest Well house 1951
The Vancouver house in 1951, purchased for $10,500. - Davis family
Invest Well house 2021
The Vancouver house in 2021, with an assessed value of $3.6 million. - Davis family
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