The real estate industry is cyclical, and we can learn a lot from its history. Looking over the past few decades, owning real estate, especially new construction real estate, has been a good long-term investment. Riding out economic cycles and grabbing opportunity when it presents itself combine to create the optimum return on investment for homeowners. Ownership is also a tremendous way to pass along wealth to younger family members, and it brings with it the possibility of earning passive income through renting.

Wise long-term investment

It is difficult for today’s new home and condominium buyers to understand that in the early 1980s, Canadians faced interest rates that skyrocketed higher than 20 per cent. Inflation hit more than 12 per cent and economic growth slowed. Homeowners who had purchased during the 1970s at much lower interest rates were hit with far higher rates to renew. Some were forced to foreclose, and the housing market stalled. In 1981, the average five-year fixed mortgage rate reached a high of approximately 21 per cent. Those who could (mainly Baby Boomers) bought real estate, and those who persevered over economic cycles are now handing their investments down to their fortunate children. Put in perspective, owning real estate proved to be a wise long-term investment for many.

Then, of course, things went haywire again in 2008, when the U.S. market crashed and prices fell here, too. Our conservative banking practices saved us from the fate south of the border, and in response to the situation, the Bank of Canada lowered interest rates. Home prices rose again, and those who found ways to hold on to their real estate did well in the long run.

Home prices in Canada reached their highest point in 2017. To cool the market, the government introduced the Fair Housing Plan and the foreign buyer tax. As a result, sales dropped and prices fell temporarily. Then COVID descended upon us, and home prices rose because of demand. People sought larger living spaces during lockdown, especially those who were able to work from home. Urbanites moved to smaller towns, and we enjoyed historically low interest rates.

Prices will rise again

Real estate cycles come and go, but the market always comes back – and when stability is restored, prices will rise again. If you look at prices over the long run, since 1994, the GTA’s housing values have risen 436.2 per cent overall. In other words, every generation of Canadians has faced homeownership challenges; yet over the past few decades, Canadians have earned substantial long-term wealth by owning houses and/or condos.

Despite the doom and gloom in today’s media, now is the best buyers’ market in decades. Like everything, however, this, too, shall pass. Buy now, before it does.