Hot housing prices countrywide trend -- zt

Eliav · Jun 22nd, 2004, 06:06

Gains in smaller centres beat Toronto
Ottawa had 512% return in past 5 years

If you bought a home in the Toronto area over the last 10 years, congratulations. You just doubled your investment.

According to a study of the 20 biggest Canadian housing markets, released yesterday by Century 21 Canada, Toronto homeowners have much to smile about. But not as much as those in some other markets.

Buyers who purchased their homes outright in Halifax-Dartmouth 10 years ago would have seen a 146 per cent rise in the price of an average home in that city, while buyers in cities such as Peterborough would have seen values rise by 143 per cent. Out west, buyers in Saskatoon and Regina would have seen a 137 per cent return.

"I guess what the survey is saying is that rising house values aren't just a Toronto phenomenon. This is happening all over the country, and in a big way," housing analyst Will Dunning said in an interview.

The 104 per cent return in Toronto however, failed to beat the S&P/TSX composite index, which saw a return of 131 per cent over the same period.

An earlier study by Dunning, covering a 20-year period, also concluded that in the long term, the stock market will invariably beat the housing market.

However, once you factor in having to pay rent, housing becomes an attractive alternative.

"If you could live in a cardboard box, then the stock market is the way to go. But housing has a dual purpose, which makes it attractive because you have to live somewhere anyway," said Dunning.

Century 21 also calculated the return on investment for those who did not buy their homes outright but, instead, placed a down payment and took a mortgage on their home. Using a $20,000 down payment as an example, the company calculated what kind of returns homebuyers would have received.

"People typically don't buy their homes outright; they put a down payment first and then they leverage that money," said Century 21 president Don Lawby.

Based on this calculation, the winners were typically in the smaller markets. Over the past five years, buyers in Ottawa would have seen a 512 per cent return on their $20,000 investment, while someone in Peterborough would have seen a 357 per cent return. Big cities such as Vancouver and Toronto would have seen more moderate returns of 50 per cent and 126 per cent, respectively.

"The big centres, which by far had the highest values, also saw a tremendous downturn in the '90s, which took them a long time to come out of," said Lawby.

In fact, the study shows you would have lost money if you placed a $20,000 down payment on a home in Vancouver 10 years ago. The city, which was flying high in the 1980s before succumbing to a tough recession, registered a negative 13 per cent return on investment.

One reason that big cities did not fare as well was the cost that big-city buyers have to pay to service larger mortgages, which ate into their returns. The size of the down payment was also a factor.

Twenty thousand dollars is a smaller than normal down payment for a Toronto home ― and a larger down payment would have had an impact on reducing the costs to service a larger mortgage, Dunning said.

The study also used posted five-year mortgage rates. Because you can typically negotiate a percentage point off those rates, the 10-year return would leap from 100 per cent to 150 per cent in the Toronto scenario, said Dunning.

"I think the study shows you can generate reasonable returns from real estate and that, even if real estate goes into the tank, as we have seen with some centres, it will return," said Lawby.

But while many homeowners are seeing good returns on their investment, the reality is that returns are not available until the real estate is sold.

"At that point, you still have to live somewhere. If you buy into the same market, then you're not seeing those gains. You'd have to downsize or move to another, cheaper market," said Lawby.

The Toronto Real Estate Board reported earlier a record 9,193 homes were sold in May at an average of $325,501. While sales still will be substantial this year, the housing market is expected to start to trend down in 2005, according to Dunning. Home sales are forecast to bottom out by the end of 2006.

http://www.thestar.com/NASApp/cs/Con...l=968793972154

Jun 22nd, 2004, 06:06	#1
Eliav Junior Member 注册日期: Jul 2004 帖子: 15	Gains in smaller centres beat Toronto Ottawa had 512% return in past 5 years If you bought a home in the Toronto area over the last 10 years, congratulations. You just doubled your investment. According to a study of the 20 biggest Canadian housing markets, released yesterday by Century 21 Canada, Toronto homeowners have much to smile about. But not as much as those in some other markets. Buyers who purchased their homes outright in Halifax-Dartmouth 10 years ago would have seen a 146 per cent rise in the price of an average home in that city, while buyers in cities such as Peterborough would have seen values rise by 143 per cent. Out west, buyers in Saskatoon and Regina would have seen a 137 per cent return. "I guess what the survey is saying is that rising house values aren't just a Toronto phenomenon. This is happening all over the country, and in a big way," housing analyst Will Dunning said in an interview. The 104 per cent return in Toronto however, failed to beat the S&P/TSX composite index, which saw a return of 131 per cent over the same period. An earlier study by Dunning, covering a 20-year period, also concluded that in the long term, the stock market will invariably beat the housing market. However, once you factor in having to pay rent, housing becomes an attractive alternative. "If you could live in a cardboard box, then the stock market is the way to go. But housing has a dual purpose, which makes it attractive because you have to live somewhere anyway," said Dunning. Century 21 also calculated the return on investment for those who did not buy their homes outright but, instead, placed a down payment and took a mortgage on their home. Using a $20,000 down payment as an example, the company calculated what kind of returns homebuyers would have received. "People typically don't buy their homes outright; they put a down payment first and then they leverage that money," said Century 21 president Don Lawby. Based on this calculation, the winners were typically in the smaller markets. Over the past five years, buyers in Ottawa would have seen a 512 per cent return on their $20,000 investment, while someone in Peterborough would have seen a 357 per cent return. Big cities such as Vancouver and Toronto would have seen more moderate returns of 50 per cent and 126 per cent, respectively. "The big centres, which by far had the highest values, also saw a tremendous downturn in the '90s, which took them a long time to come out of," said Lawby. In fact, the study shows you would have lost money if you placed a $20,000 down payment on a home in Vancouver 10 years ago. The city, which was flying high in the 1980s before succumbing to a tough recession, registered a negative 13 per cent return on investment. One reason that big cities did not fare as well was the cost that big-city buyers have to pay to service larger mortgages, which ate into their returns. The size of the down payment was also a factor. Twenty thousand dollars is a smaller than normal down payment for a Toronto home ― and a larger down payment would have had an impact on reducing the costs to service a larger mortgage, Dunning said. The study also used posted five-year mortgage rates. Because you can typically negotiate a percentage point off those rates, the 10-year return would leap from 100 per cent to 150 per cent in the Toronto scenario, said Dunning. "I think the study shows you can generate reasonable returns from real estate and that, even if real estate goes into the tank, as we have seen with some centres, it will return," said Lawby. But while many homeowners are seeing good returns on their investment, the reality is that returns are not available until the real estate is sold. "At that point, you still have to live somewhere. If you buy into the same market, then you're not seeing those gains. You'd have to downsize or move to another, cheaper market," said Lawby. The Toronto Real Estate Board reported earlier a record 9,193 homes were sold in May at an average of $325,501. While sales still will be substantial this year, the housing market is expected to start to trend down in 2005, according to Dunning. Home sales are forecast to bottom out by the end of 2006. http://www.thestar.com/NASApp/cs/Con...l=968793972154
Eliav Junior Member 注册日期: Jul 2004 帖子: 15