4 reasons why homeownership remains a smart investment for Canadians

It’s no secret that the Canadian housing market has faced challenges over the past couple of years. Interest rates have risen, inflation has persisted and everything seems more expensive than ever. The good news is that there are signs of improvement. We recently saw a decline in interest rates in June, marking the Bank of Canada’s first rate cut since March 2020. Also, home prices have been declining across the country, making homebuying more palatable for many. Despite the economic conditions, the truth remains that buying a home and investing in real estate continues to be an often smart, long-term investment for Canadians both personally and financially.

1. Grow your wealth through equity

As a homebuyer, you gain one of the most significant advantages to grow your future wealth – the ability to build equity over time. When you rent, your monthly payments go to a landlord, but with a mortgage, these payments help you contribute to owning a valuable asset. As you continue to pay down your mortgage, the difference between your home’s value and what you owe on it – your equity – increases. Over time, the equity you build can serve as a financial safety net that enables you to borrow against it for major expenses or to fund future investments.

The type of mortgage you get is very important, as it can affect how quickly you build equity and the overall cost of your home. At Homewise, our mortgage advisors spend a great deal of time with Canadians to understand their short-term and long-term financial goals to ensure they get the right mortgage that suits their vision for their financial future.

2. Potential for property value appreciation

While the real estate market experiences ups and downs, Canadian property values have a long history of trending upwards. Although recent years have shown market fluctuations, particularly since the start of the pandemic, the overall trajectory remains positive over the long term. Owning a home represents a wise long-term investment, with the potential for significant returns when it’s time to sell. The increase in your home’s value can substantially enhance your net worth and offer financial stability for retirement and other important life milestones like a child’s post-secondary education or a vacation property. Important to note, that this is a long-term strategy, not a “get rich quick” situation in most circumstances. As Canada’s population continues to grow, the supply vs demand curve should continue to see home prices rise over the long-term.

3. Access to tax benefits

In Canada, owning a home offers several notable tax benefits. For instance, when selling your primary residence, you may qualify for the principal residence exemption, allowing you to avoid capital gains tax. Additionally, various home improvements and energy efficiency upgrades might be eligible for tax credits or rebates, helping to further reduce your overall tax burden. Furthermore, property taxes and mortgage interest can often be deducted from your tax bill, providing additional financial relief.

If it’s your first home, you also have access to the Home Buyer’s Plan, allowing first-timers to withdraw up to $35,000 from their Registered Retirement Savings Plan to use towards their downpayment. This is all without paying taxes on the withdrawal, provided the funds are paid back within 15 years.

4. More stability and personal freedom

Owning a home provides significantly more stability compared to renting. As a homeowner, you’re not affected by sudden rent hikes or the possibility of your landlord deciding to sell the property. This stability enables you to make long-term plans, both financially and personally. Additionally, homeownership grants you full control over your living space. You have the freedom to renovate, decorate or landscape your property according to your preferences and lifestyle, all without needing anyone’s approval.

Despite the challenges in the Canadian housing market, homeownership remains a positive, long-term financial decision. With prices dropping, it could be a good time to start your process of consideration. With benefits such as growing equity, potential property value appreciation, tax advantages and increased stability, owning a home – with the right mortgage – continues to offer a range of financial and personal benefits.