The buying and holding of real estate over a long term to create wealth is not a surprise to many, but a study out of Canada shows the long term benefits of owning real estate. When you factor that you will have housing costs to pay, and typically hold a mortgage against the property, the wealth effect is still in force.
An analysis of 17 housing markets across the country by Re/Max real estate company released Wednesday found that the average price of a home in Canada rose 11 per cent annually over the 25-year-period studied, rising from $76,021 to an estimated $277,000 in 2006.
Almost half of the markets reported double-digit appreciation annually, according to Re/Max; and leading the way was Barrie, Ont. The small city north of Toronto saw a price increase of 372 per cent over 25 years.
Price appreciation topped 240 per cent in seven Canadian cities, including Ottawa (297 per cent), Greater Toronto Area (290 per cent), and Greater Vancouver Area (242 per cent). Victoria reported a 229-per-cent jump and Calgary was up 227 per cent. via the Ottawa Citizen
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If the housing prices in Canada had gone up 11% annually for 25 years then a $76k house would be worth over $1 million. Their math seems completely wrong.
11 % annually for 25 yrs = (1.11) ^ 25 = 13.6
13.6 * $76k = $1.03 million
They took an 11% rise in the first year ($8,360) and added that amount 24 times. This is terribly misleading. The actual annual increase in the example they use is under 5.5 percent. Hope this was a mistake and not deliberate. The Ottawa Citizen should check these things before they print them.
You guys are right, stupid me for trusting a newspapers numbers. I will revisit this post with the proper numbers.
Data can certainly be misleading at times.
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