Thursday, March 25, 2010

Where can you get this return? Average and medium sale prices for last 10 years in GTA real estate

The graph below shows the average and median sales prices for the past 10
years. This graph clearly indicates that real estate is a great investment
over the long term.

I hope this finds you Happy and Healthy!

All the Best!


A. Mark Argentino
P. Eng. Broker
Specializing in Residential & Investment Real Estate

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  1. Well you should also put a disclaimer on this as past returns do not guarantee future ones.

    How about a stock like HANS. Return of 7000% plus in 10 years. or UPL 2500% plus in 10 years.

  2. Yes, this is a very good point!

    All people now insert this disclaimer and we realtors should probably follow the lead.

    Certainly I am one of the people who thought the stock markets, Nortel and other pennies that I purchased could NEVER go down, boy did I pay for that. I should have put every dime I ever put into the stock market into real estate. Not only has real estate done well, but it's leveraged investing, so you reap a huge return on your small downpayment, people seem to ignore this fact when they buy stocks versus real estate. I will blog about this in the future.

    Thanks again for your comments!

  3. All assets classes eventually go down, especially when assets deviate from fundamentals. Real estate in Canada is percieved by most people today as a safe investment and an asset class that cannot possibly go down. Even you in your chart show once direction that real estate can travel and that is up, but real estate can travel in three directions, it can keep going up, stay around the same price or go down. It is obvious that the real estate market would still be correcting today if it wasn't for the cheap money thrown at the masses plus the tax changes that are going to happen in the future. You can see by the volume that people are rushing in to take advantage of the rates.
    Real estate is much more sensitive to rate increases as today's generation uses your so called good leverage to the max. Leverage is wonderful to the upside, but it is deadly if prices start declining. Your small downpayment can be wiped out very quickly and is some cases the day you bought real estate depending how much you put down.

    Real estate is a non-productive asset. Once you buy it you have plenty of expenses. Utility bills, property taxes, maintenance, if you take a mortgage closing costs, mortgage insurance, interest. I would say most people will probably break even on their real estate (one they live in) long term if you count up all the money you have spend.

    Stocks you have to have someone who understands how the market operates and who has the edge in the market place. Stocks can go down and a lot of them do, but the leaders can market share. Boom and busts cycles happened in the past and will happen in the future. I mean US has had more than 20+ boom and busts cycles, but obviously the media doesn't really write about this as the bust gets quickly forgotten.

    When you run an economy on leverage you will have melt-downs, that is just the way things are today.

    What do you think an average American would say in 2005 about real estate?

    I mean they can blame real estate meltdown on subprime and shady lending, but real estate in US declined because people no longer could afford it and were stretching their budgets to the limits to buy real estate.

    Here is the answer.

  4. Hello and thank you for your very detailed and informative post.

    I completely agree that real estate is almost a break even venture, on a monthly payment point of view. I've always viewed my principal residence as a 'forced' method of long term savings. It's still expensive to maintain and pay even when the mortgage is paid off, property taxes alone are over $40,000 to $50,000 or more every 10 years.

    Yes, there is boom and bust in real estate and the markets, timing is, as usual, most critical when you are entering or exiting.

    I also agree that real estate is interest rate sensitive. Some feel much of the current cycle is due to low rates and the smallest increase will cool our market. Again, only time will tell on this.

    Thanks again for your comments.

    All the best!