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Investing Smart is a way to get a better life

hammock_RRSPAccording to a new report from TD Economics, investors need not worry about the housing market crashing over the next ten years.
The research paper released just recently predicts that after the housing market has undergone a “gradual, modest, downward adjustment over the next three years,” the annual rate of return for real estate will dip to the 2 per cent mark – and stay there.“A string of lackluster performances will mean in nominal terms will be roughly 2 per cent over the next decade,” says the report. “In other words, real estate gains are set to match the pace of inflation.”
Queens University real estate professor John Andrew agrees with the projection. “I wouldn’t even be surprised if the growth rate for housing is less than inflation over the next decade,” he says. The findings are in stark contrast to predictions from Moody’s Investors Service, which claimed yesterday that Canada was on track for a severe correction with prices being knocked down by 44 per cent. TD chief economist Craig Alexander says the bank’s report disputes claims like these that propagate the belief a correction is on the cards.
“I do not think we have a housing bubble in Canada,” he says. We have had abnormal strength in the market during a period of low-interest rates and when rates go up over the next three years, you will get a cooling and weaker prices, but not a permanent shock and not a sharp correction.”
But with two reports in as many days offering such conflicting projections, it’s important that investors be mindful of the relevance of such macroeconomic national reports”
“Investors have to remember this is talking about national averages and price changes, it’s not really relevant to the average investor investing in a local market. Even within a local market, you’ll have different asset classes that will perform differently – what’s happening in the housing market will be different to what’s happening in the condo market. Large scale, ten-year predictions like this – it’s something to be aware of, but not something Private Lenders would be worried about as an investor.”   Predictions in the report will likely come to fruition, and points to two key variables investors should consider when analyzing the market in the long-term. “One is income growth,” investors say “and I think this report is quite accurate in terms of their predictions regarding this. We’ve already seen a significant slowdown in income growth across the country.” We predict the rise of interest rates as another key variable. “We may not see them rise for the next 3 or 4 months, but when they do – even modestly that will have significant cooling effect on the market as well.”

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