Canadian Stocks Beat Vancouver Real Estate (1994-2016)

 

 

Ask this question on the street. 

What has performed better, Canadian stocks (as measured by the S&P/TSX Composite Index) or single-family homes in Vancouver, B.C.?

Few people on Canadian streets would pause to answer. They would say Vancouver real estate.  It’s a rocket. 

If you caught a ride on the average Vancouver home, your assets would have soared.  In 2015, Global News referenced real estate prices using data from the Real Estate Board of Greater Vancouver.

In 1994, the average detached Vancouver home sold for $368,800.  In 2015, it increased to $1,826,541.  By 2016, it had slipped to $1,470,265.  But that’s still a massive gain of 299 percent over 22 years.

You might be surprised how the stock market has performed. If you could have invested $368,800 in the S&P/TSX Composite Index on January 1, 1994, it would have grown to $2,006, 272 by December 31, 2016.

If you had invested $368,800 in Vanguard’s S&P 500 Index the money would have grown to $2,716,520 by December 31, 2016.

I’m not suggesting that stocks were necessarily a better investment over the past 22 years.  Investors can borrow to buy real estate and leverage their gains.  They can also rent their properties, creating cash flow in the process.

But anyone who kept a cool head, kept investment fees low and invested regular sums over the past 22 years in the stock market would have done a whole lot better than most people think. 

If you are interested in building a portfolio of index funds, check out the second edition of my bestselling book, Millionaire Teacher (Wiley 2017).

 

Vancouver Single Family Home Prices versus Canadian and U.S. Stocks

 

1994 Value

2016 Value

Percentage Gain

Vancouver Real Estate
(Average Single Family Home)

$368,800

$1,470,265

+299%

Canadian Stocks

$368,800

$2,006,272

+444%

U.S. Stocks

$368,800

$2,716,520

+636%

Sources: Real Estate Board of Greater Vancouver; S&P/TSX Composite Index and S&P 500 including dividends reinvested

Image By Pixabay





Andrew Hallam

I’m a financial columnist for Canada’s national paper, The Globe and Mail, as well as for AssetBuilder, a financial service firm based in Texas. I’m also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School (Wiley 2011) and The Global Expatriate’s Guide To Investing: From Millionaire Teacher to Millionaire Expat (Wiley 2015). My mission is to educate, motivate and inspire people on basic retirement planning and best practices for investing, using evidence-based strategies. I'm happy to comment on your questions. However, please read the Terms of Use.

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6 Responses

  1. Colleen says:

    Andrew,
    Happy New Year!
    Always great articles, Thank you. You mention the $368,800 was enough to buy the average Vancouver home in 1994. I am assuming the money invested in both the in both the TSX and S&P 500 is at the AVERAGE 1994 price and not the lowest possible price that year. Please clarify. Also when you are quoting annual returns in previous articles do you use a specified date as your benchmark i.e. a 10 year return with everything being purchased on January 2nd of every year or is it buying at the lowest possible price. I know you always says it more about “Time in the market, not Timing” but again please clarify.
    Colleen

    • Hi Colleen,

      In both cases, I started at January 1, 1994.
      If I post annual returns in other stories, I believe that I always include the dates. Sometimes, if the story is a mid-year story, I’ll write, “Ten year returns to June 30th, 2016” if that happens to be the date I’m writing.

      Cheers,
      Andrew

      Cheers,
      Andrew

  2. Francis says:

    The only detail that you omit is that the overwhelming majority of people buy home with a least 80% leverage or more and they buy stock with no leverage. So Vancouver home owner win hands downs.

    • Hi Francis,

      I did not omit that. In the third paragraph, I wrote this:

      “I’m not suggesting that stocks were necessarily a better investment over the past 22 years. Investors can borrow to buy real estate and leverage their gains. They can also rent their properties, creating cash flow in the process.”

      Cheers,
      Andrew

    • Jen says:

      I don’t think it’s that simple….because with owning a house you do have to repay the borrowed money and even if you rent it out still there is tax,insurance and money to fix it up if something goes wrong! I personally both are good to have…a property and stocks & bond.

  3. Dividend Growth Investor says:

    It is interesting to see how much better US stocks have done relative to Canadian ones over the past 20 years.

    On the housing front, it is hard to do an apples to apples comparison to stocks. This is because a house provides a “housing dividend”, which is the ability to live in it, which saves on rent. However, this benefit is offset by taxes, maintenance, insurance etc. Perhaps there are average stats to incorporate.

    Anyway, hope all is well with you. I see your books being recommended by others, so you must be doing something right!

    DGI

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