Article content

I’ve never really understood why people think the price of a home shouldn’t be adjusted for inflation. This is like watching reruns of The Price is Right from the 1970s and expecting to buy a car for $4,000. I’m not sure why people expect that 2017 price or even the pre-pandemic average price of $540,000 in February 2020.

Article content

How far do they want prices to fall? Shouldn’t prices be rising with inflation with maybe a couple of extra points return per year to make it a decent investment?

Article content

All that said, if you bought at the top, you have serious issues to consider, especially if you purchased a pre-construction unit and cannot get financing because you have no equity or negative equity.

Article content

John Andrew, a retired Queen’s University professor who is now an independent wealth adviser, has a family friend whose daughter is in that exact scenario.

Article content

“She has a little bit of buyer’s remorse in the sense of, ‘What have I done?’” said Andrew, who ran regular real estate seminars for some of the country’s top executives for years, about a 2023 purchase.

Article content

Andrew says to stay put and consider the long-term cost of your house, including financing. Let go of the idea that “real estate prices just always go up,” but consider the long-term return you will probably get, which he still thinks can beat inflation.

Article content

Article content

For the end user, a home, be it a low-rise property or a high-rise condo, has always been part investment and part consumable commodity.

Article content

Broader market indices have gone up for decades, but you can’t get Canada Mortgage and Housing Corp.-backed financing to invest in the TSX composite with five per cent down and 20-to-1 leverage, can you?

Article content

Leverage has destroyed many in real estate, especially investors. It was an easy formula to buy a $1 million condo with, say $100,000 down, watch it climb to $1.1 million in a short period and make 100 per cent on your investment.

Article content

Roll the dice, and you lose sometimes. Leverage, and the pain is far worse.

Article content

Ben Myers, president of condo research firm Bullpen Research & Consulting Inc., still believes a prime motivation for Canadians to own real estate is forced savings. He’s correct: behaviour matters.

Article content

Realtors often cite the corny expression that you can’t live in your investments, and they are partially correct. The other reason to own is security of tenure, a long-term place to raise your family without the risk of a landlord kicking you out for a variety of reasons.

Article content

Article content

If you need a house today for the life circumstances, that is justification for buying. Timing the market when it comes to a principal residence doesn’t always match your personal needs.

Article content

The investor who now has to close on a property bought three years ago? Myers said they can assign the property to someone else, but that comes with a risk that the person may not close and leave you liable.

Article content

“You may be looking at paying someone to take your investment over,” he said, adding the best option at this point is somehow to figure out a way to close, rent the unit and hope the market picks up.

Article content

If your life changes or you really need to move, there are valid reasons to sell and take your lumps. But moving is a wealth destroyer, you do it when necessary.

Article content

When you add up real estate commissions, land transfer taxes, moving costs, breaking your mortgage, lawyers and other fees, you can easily chew up close to 10 per cent of your equity.

Article content

People get mad paying $9.95 for a stock trade, but giving up tens of thousands on a real estate trade hasn’t bothered them in a rising market.

Article content

Limit your moves, even in a falling market today. Your last move out of your home should ideally be in a box. Every one will cost you.

Article content

Article content