Your home is more than just a dwelling that protects you from the elements.
Your home is also a financial nest egg and an asset, according to Ted Tsiakopoulos, regional economist for the Canada Mortgage and Housing Corporation (CMHC) and one of the speakers at the recent 2014 CMHC Toronto Housing Outlook Conference called “What will drive the market?” The event was held at the Metro Toronto Convention Centre at the end of November.
Tsiakopoulos noted that residential real estate is more than just a roof over peoples’ heads. “It is something more,” he said. “Not only is it real estate that contributes to [financial and economic] growth over time, but it is also a ‘flight-to-quality’ asset.”
A flight-to-quality asset is something that people “turn to when things get scary in the global economy,” he said. “People see their homes as an investment and an asset and not just a roof over their heads, and there’s a reason to see it that way.”
He noted that “what has driven growth since 1999 is really the equity in peoples’ homes, so I can’t blame households for feeling that their home is something more,” said Tsiakopoulos.
Since 2001, the world has become increasingly uncertain, he said. “We have had Sept. 11, SARS, the U.S. credit and housing crisis, the global economic crisis, and these events have created a lot of shocks to the global economy. When uncertainty grows, the appetite for risk typically diminishes.”
Following those major events, “a lot of investment capital went into gold and bonds. There was a general flight to quality and investors were shifting capital into these assets as well as to residential real estate.”
Between 2001 and 2012, “housing was considered a flight-to-quality asset,” he noted, but the trend began earlier. “Over the last three decades, residential real estate was a more stable asset by far than many stocks.
A turning point has occurred since 2012, he stated. “The appetite for risk was starting to increase early in 2012. Does that mean there will be an exodus of investment out of residential real estate? No. Existing investors were holding on.”
Tsiakopoulos was one of the key speakers at the conference. Bob Dugan, chief economist at CMHC, addressed the topic of the national economic and housing market outlook. Dana Senagama, senior market analyst for CMHC, discussed the question of “Who will buy and sell in the GTA housing market?” The conference provided access to reliable, impartial and current housing market reports, analysis and knowledge.
For more details, visit www.cmhc.ca.