Net Worth and the Realty Cycle
National Net Worth and the National Realty Cycle
Canadians' Net Worth being directly tied to Primary Residence Valuations has been a historical fact since Confederation. Historical review of how Net Worth has been affected by Realty Cycles in the past, can provide guidance for the future when planning for your retirement.
The most recent completed National Realty Cycle concluded in 1996 after reaching its peak in calendar year 1989. It took another two years into the next cycle before house prices returned to their inflation and quality adjusted value. During the most recently completed National Realty Cycle, then current home valuations, which reached a maximum Surplus Over Sustainable price also in 1989, contributed to Canadians having reached an Average Net Worth of $183,388 by year's end. A short 6 years later, at the conclusion of that cycle, Average Net Worth had fallen to only $109,717.
What was even more interesting from a historical perspective is that even with this hindsight available, Canadians continued to rely on their Primary Residence as their primary investment vehicle. The result of that not using that hindsight is that it took Canadians another 22 years for their Average Net Worth to reach $183,388 again (1st Quarter 2012).
On Feburary 27th, 2014, the latest calculations for Net Worth were released from StatsCan to great fanfare across the land. It appears history once again has been forgotten and the "Illusion of Wealth" is once again dominating the headlines and dominating the financial decisions being made..
Ross Kay Realty Consultants consistently warns about viewing your Primary Residence as an investment. Investment Properties and your Primary Residence, are two totally different types of real estate and each requires an equally different perspective to effectively own in a manner that works towards your positive Net Worth growing and remaining protected..
(All Net Worth calculations are in 2007 Constant Dollars and taken directly from StatsCan reports found here, page 4-20,
All Realty Cycle dates and SOS comparisons are taken from Ross Kay Realty
Consultants found here http://www.rosskay.com/ )