Canadian Real Estate vs. the Stock Market

April 15, 2021 | Gary Weatherup



From RBC Global Asset Management:

"When comparing real estate and equity investments, it’s important to understand the historical growth associated with these different asset classes. A common misconception among many investors is that, historically, real estate has been a better long-term investment than equities. Looking back, however, the data suggests otherwise.

Equities have been a more effective way to grow wealth compared to real estate.

Key factors to consider when making the comparison:

  • Real estate purchases are typically highly mortgaged (or leveraged), which can magnify gains. In Canada, it’s not uncommon to see loan-to-value ratios of 80% or more. By contrast, equity market investments are typically not purchased with borrowed funds.
  • Costs such as real estate commissions, taxes, maintenance and repairs are not included in the data. Neither is potential rental income. These would all impact investment returns in real estate.
  • One cannot invest directly in an index. Transaction costs, investment management fees and taxes are not reflected, which would negatively impact returns for equity investments. Past performance is not a guarantee of future results.

When deciding between investments in real estate or equities, it is important to keep in mind that the best asset class for you will depend on your own unique investment goals, time horizon and risk tolerance."

Click here to link to the RBC article