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Is your home an investment?

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I’ve seen it argued that while it may be a poor time to buy investment property in Vancouver, it’s never a bad time to buy a home you live in because ‘your primary residence is not an investment‘. While its true that your home will never be as liquid as stocks or a high interest savings account, it seems disingenuous to claim that your primary home is not an investment, particularly when the next reason to buy now is often that ‘prices always go up in the long run‘.

If the hope for future price increases isn’t an investment than what is it?

According to this article the average house price in Vancouver for November was $519,294, down about $29,000 from the previous month. Now I don’t know about you, but anything I buy for more than a half million dollars is going to be a fairly major purchase in the grand scheme of things, and $29,000 represents some nice renovations, a chance to buy more space or a few really nice vacations.

Maybe I should be unconcerned about the historical ups and downs of the real estate market since my home is not an investment, but if its not an investment then why is it so much more expensive to buy then it is to rent the same property?

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West Toronto Realtor

I can only agree with the autor, you should see your house like an investment. It´s probably the biggest investment you have. I have many clients, who are more willing to invest their money on real estate market than buying real estate funds or stocks. If you choose an appropriate real estate, in long term view, you can earn a lot of money on it.

To fgah, is that really true with the house? I´m a West Toronto Realtor, but I know Vancouver and that is a really high price for that area. I would like to know more about the house.

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fgah

Didn't you know that on last week Vancouver Sun report:A house on 731(a drug and prostitution infested area)sold for 900000 plus isn't that crazy!I would never pay more than 250000 for the same house.No way man if Vancouver is the place left after a Nuclear Holocaust.

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patriotz

You have to love the US for their great contradictionsAnd let's not forget the "screw the new buyer" schemes like Prop 13 in California and SOH in Florida, which tax a house on its purchase price, not the market value. SOH has the added twist of allowing differential rates for non-residents.That means your neighbour next to you with the paid off mortgage can pay less than 1/2 the property taxes on the same house! Plus he can vote for more local government spending which you get to pay for!Destroy the capital markets for real estate! It's the American Way!

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the pope

Hey all, Thanks for the feedback on the mortgage deduction issue, I hadn't fully thought that one through. The medicine/mcmansion contradiction is a pretty major one.Myraa: thanks for the BC assessment link!

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bc_cele

patriotz said… Mortgage interest deductibility for personal residences is one of the worst tax policies imaginable. It is directly responsible for both the bloated prices and high personal debts south of the border.Bringing in m.i.d. in Canada would result in a one-off windfall for house owners (higher prices), and a continuing benefit (tax deduction). The cost of which would be paid by non-owners, who would be even worse off than they are now.It makes no sense either from an economic or social equity point of view. As it stands right now a personal residence is tax neutral (no taxability or deductibility), and it should stay that way. You have to love the US for their great contradictions. This is a country that can't stand the thought of socialized medicine because it mean that you may have to pay for your… Read more »

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Anonymous

Agreed patriotz.Mortgage interest deductability just shifts the tax burden from the (typically) better-off homeowner to the (typically) poorer renter.- BCubbins

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patriotz

Mortgage interest deductibility for personal residences is one of the worst tax policies imaginable. It is directly responsible for both the bloated prices and high personal debts south of the border.Bringing in m.i.d. in Canada would result in a one-off windfall for house owners (higher prices), and a continuing benefit (tax deduction). The cost of which would be paid by non-owners, who would be even worse off than they are now.It makes no sense either from an economic or social equity point of view. As it stands right now a personal residence is tax neutral (no taxability or deductibility), and it should stay that way.

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mk-kids

i am soooo sick of the "buy now or be priced out forever" crap. i'm so pissed with the scotia analyst for repeating such hogswallow i want to close my account there. why are people so stupid??!! aarrrgghhhh! if everybody is priced out forever then who is gonna buy your leaky piece of crap condo when you need to sell? huh?

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MyraA

Here is a link to the BC Assessment website where you can get the current assessment for any home in BC. The website is open to the public from January 2-March 15 each year. http://www.bcassessment.bc.ca/asba2007/asba2.aspx They added a great new feature. Sales date sorted by area for homes that sold last year. Awesome! http://www.bcassessment.bc.ca/sss2007/sss2.aspx Have fun!

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solipsist

if mr.b brought pros mr b should also become g a hole income will be double…..its better to keep clean spill from this site thanx. RC – is that you? Post some stats ferfaxaches!

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Anonymous

ASeEsSMENT NOTICEis poped in mail box today to kick start fresh new start for 2007 and its going to rock mkt. tomorrow to touch 1000per sqfeet around 2008.BORAT—–if mr.b brought pros mr b should also become g a hole income will be double…..its better to keep clean spill from this site thanx.

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BCBuds

I think this is Rennie posting and he's losing it!http://vancouver.craigslist.org/rnr/256683431.html

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wannaget2calgary

Hey WG2C, sorry to hear that, but thanks for personal example of how things can go wrong with real estate 'investments'Candidly, I think the "investor" plays a role here … I have a habit of buying high and selling low. I don't think I've got it quite right yet. :-)Having said so, I think a lot of people are about to endure real misery with their RE investments, as the housing market saga continues to unfold.

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Clarke

To echo others, a home is an investment insomuch as you are purchasing an asset in lieu of incurring a shelter expense (rent). That being said, homes are not assets with a lot of liquidity and their market value can fluctuate rather dramatically. Given the high cost of homes, and the fact that the decision to buy or sell often has more to do with life circumstances than market conditions, there are added risks.As we are in a bubble now, with double digit percentage price increases every year, many have latched onto the idea that this is an easy way to get rich….

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bc_cele

I like the arguments put forth by Warren and Anon 3:38. I personally don't feel that a home should be viewed as an investment, but by definition, it is. The problem, as I see it, isn't so much whether your home is an investment, but if a home should be purchased soley as an investment. My answer to this has always been – no bloody way, and for the reasons mentioned in these two posts.

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Anonymous

Investment or not, Scotiabank experts are telling us that now is the time to buy. Right NOW!!http://www.canada.com/theprovince/news/money/story.html?id=2009f087-7f0d-40d7-b32f-5e95fa2651ddCarey Ellingson, branch manager, Scotiabank, Sherwood Park, Alta.: Buy while you can!Ellingson says the new mortgage options of zero down payment and amortization periods up to 35 years can help first-timers to buy a home before prices rise out of reach.He expects real-estate prices in some provinces to rise further. If you are a borderline buyer today, "the longer you wait, the less opportunity you will have," Ellingson says. "Take the leap of faith" and buy while you can.– BCubbins (for some reason blogger isn't letting me sign in)

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the pope

We bought our last home in 1995 and sold it for less than the purchase price six years later, after spending many tens of thousands of dollars on improvements.Hey WG2C, sorry to hear that, but thanks for personal example of how things can go wrong with real estate 'investments'I don't consider a home an investment, especially considering that in Canada we can't use mortgage interest as a tax deduction on our primary residence.I agree Warren – I wonder if this will change in Canada? I haven't heard any great demand for it, but writing off interest on a primary residence would create a bit of a different market for single home owners vs. speculators.Happy New Year to you too MK-Kids, and everyone else as well!

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the pope

Anonymous postings rule!Because they're always right on topic? Are the anons feeling shut out of some other local blog comments?My dad said land worth more than gold.Awesome! I'm going to dig some up from the park across the street and I'll sell it to him for half price! You know what I think? I think your posts are the invention of a bearish troll trying to get a reaction, which I must admit you do get.

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Anonymous

Anonymous postings rule!

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Anonymous

"My dad said land worth more than gold."I bet your dad is a realtor.trying to get another commission from his own kid.Quite Frankly, I am not surprised.

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Anonymous

The only 2 people that would author such a stupid post as anon with the Mr. a & Mr. b example are:Aaron BestReality checkHotball Rob

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Borat

My dad said land worth more than gold.Better than gold is wife who is prostitute. She will bring big money to household, plus she get very good with practice. Mr. A buy goat, but Mr. B get prostitute wife, he very happy. Mr. A only get milk and little cheese, but Mr. B get many goat cheeses when neighbours visit his wife. Plus, Mr. B get sexy time whenever he like. Wa wa wee wa! It's very nice.

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Anonymous

If people actually evaluated a house as an investment, they wouldn't be buying now. They'd be buying when prices made sense wrt rents and interest rates.People buying now are looking at a house in the same way as a Loto 649 ticket, and that's no investment.

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Gianni33

A lot of people seem to be buying property without making the realization that this is going to greatly affect their lives for a LONG time. They use "home as investment" as reasoning that they made a good decision when in fact they'll be so miserable with their ridiculous mortgage payments, locked down to their overpriced shoebox.

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Anonymous

Yeah so what? NFW is a house that sold for 75K in 1981 worth 2 mil today. As a matter of fact, there weren't any houses in Vancouver selling for 75K in 1981. At the bottom of the market in 1982-1983, just barely.

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