Personal Investor: Is your house really an investment?
Some Canadians are looking to purchase a home not only a place to live, but as an investment for when they retire. But, is this an accurate perspective to take on a home? A house can be considered an investment in some ways, but not in other ways. It can be an investment as it appreciates in value, there are tax-free gains when sold (if it is your primary residence and the value has gone up), and it saves you from paying rent and could potentially be used to earn rental income. The equity in your home can also be used as collateral to get a low-interest line of credit. However, a house as an investment can be problematic as it can’t be quickly liquidated for cash and it can depreciate.
- According to the Canada Mortgage and Housing Corporation (CMHC), the average Canadian home has grown in value by over 5 percent annually over the past 30 years.
- Assuming your property is your principal residence, any appreciation in value is tax free when it is sold.
- Real estate investment trusts (REITs), mutual funds, and exchange-traded funds can provide diversified exposure to real estate – especially if you don’t already own a home.
“For most Canadians, a home is their largest single investment, and in many cases a keystone in their retirement plan. But is a house really an investment?”