Canadians Seek to Grow Wealth Outside of Housing
The housing market across the country has soared to heights that so many of us cannot reach. Buying a home is entirely unaffordable for the majority of Canadians and for many others the debt that a mortgage incurs is simply not justifiable. Many potential buyers are using their down payment for investments such as art and stocks so they can appreciate their wealth.
Canadian stocks are very advantageous today because they have high free cash flow yields. The real estate market is offering the opposite of this. People are finding investment opportunities in index funds of natural resources and financial. Both are expected to do well even during inflationary times, like we are experiencing now.
The risk of rising interest rates makes it even harder for some people to justify a mortgage. Consider a rate increase that could make a million dollar mortgage hard to carry. And what does one million get you in this market anyway? Depending on location, it could be only a one bedroom apartment. Yes, for many, renting is now better than owning. Along with trading stocks, there are also cryptocurrencies and non-fungible tokens – NFTs that make investors money. There has also been a boom in digital art.
In December 2021, the average cost of a Canadian home was $713,500. That price was up by 17.7% from 2020. Costs have risen even higher in more populated areas of the country. In Vancouver, the average cost is $1,910,200. Clients who were waiting on prices to drop find the market is now completely out of their reach. Any house currently under 2 million will have a bidding war when it hits the market.