The More Things Change...
By on Dec 20, 2010
This is especially pertinent today, with some people panicking over the prediction that interest rates will go up this year. It’s important to keep this in perspective. Our Canadian economy is healthy right now, and even if interest rates rise, they won’t go into double digits. When I first came to Canada from Scotland in 1967, I worked for the new home builder Costain, constructing 2,000 square-foot homes that backed onto a golf course. They sold for $20,000, and interest rates at the time were 6 per cent. People thought that was outrageous and that there wouldn’t be a market at all with rates that high. Trust me – the people who bought those homes are thrilled today. What an investment those turned out to be!
And another thing that never changes is the desirability of the Greater Toronto Area as a place to live. Our area will continue to grow for decades to come, especially with the incredible immigration statistics. Nearly 20 per cent of Canadians are foreign born, and in Toronto, almost 46 per cent are immigrants. In fact, more than 80 per cent of Ontario’s immigrants settle in the GTA. And why not? We have a wonderful mix of employment, cultural and housing diversity, and we enjoy one of the highest standards of living in the world. People come to Canada for many reasons, but relative safety is another big one. We have our share of crime, of course, but Canadians are not persecuted for their religious and political beliefs. And the point is, all these newcomers need a place to live, and the demand for new housing will continue.
It all adds up to the fact that real estate is still a good investment. As you pay down your mortgage and increase your equity, you also increase the financial leverage you have for other aspects in your life and add to your net worth. What other investment can you live in, and then sell it someday and enjoy tax-free profits? And even with real estate experiencing boom and bust cycles, you can be pretty sure that the home you own today will appreciate in value in the next 20 years.
Hugh Heron is Principal and Partner in the Heron Group of Companies and President of Heathwood Homes, as well as a former Member of the Board of Directors of Canada Mortgage and Housing Corporation, and a Past President of the Toronto Home Builders’ Association and the Ontario Home Builders’ Association.