Want to invest? Think real estate!

Buying a home is like saving for the long term. As a homeowner, you make monthly mortgage payments that fund your assets and build up a substantial amount of equity that you will get back later when you sell your property.

Across Canada, real estate has increased in value over the past decade. In Quebec, the median price of single-family homes has almost doubled in the past eight years, from $110,000 in 2002 to $209,500 in 2010. This represents an average appreciation of nearly 8 per cent per year. And this growth is certainly not over if we consider the predictable evolution of the factors listed below.

What’s driving the residential real estate market?

Whether you are already a homeowner or about to become one, a property is one of the most important investments of your life. It is therefore necessary for you to know the four main factors that influence the evolution of the housing market: population growth, interest rates, income and socio-demographic trends.

It goes without saying that everyone needs to be housed, which is why the strength of the housing market is directly related to population growth. Whether through immigration, migration or natural population growth, the more positive population growth, the greater the demand for housing.

Interest rates also play a very important role in this sector. When they are low, they considerably reduce financing costs and encourage consumers to become homeowners, to buy a larger or more luxurious property, or to renovate.

The increase in property values is also a fairly accurate reflection of households’ ability to pay. Thus, the strength of the market is closely linked to job creation and household disposable income.

Finally, certain socio-demographic trends influence the real estate market. For example, when the size of households decreases, i.e. when more people live alone, as has been the case for several decades, more properties find takers.

In conclusion, remember that, regardless of the economic sector, price is always, no more and no less, an index of scarcity. Thus, all things being equal, an increase in demand means an increase in price.