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Canadians feel homes make them wealthy: real estate assets are favoured investment
Nov 05, 2004

 A majority of working Canadians believe their home will grow more in value than their investments over the next 10 years, according to the annual RRSP poll released  by Investors Group. 

Conducted by Decima Research, the poll found that 59 per cent of non-retired Canadians say they expect their real estate assets will grow more in value than their investment portfolio over the next 10 years. 

In Manitoba and Saskatchewan, the percentage is slightly higher at 61 per cent.

According to Investors Group, long-term trends show that equity markets compare favorably to real estate as an investment. Over the last 20 years, the S&P/TSX Composite Total Return average annual return as of September 30 is 9.35 per cent. Based on MLS® statistics supplied by the Canadian Real Estate Association, the average annual increase in real estate assets in Canada over the last 20 years is 5.1 per cent.

“Rising house values are making homeowners feel wealthier and that can make it more difficult to follow a disciplined savings and investment plan,” says Debbie Ammeter, vice-president of Advanced Financial Planning for Investors Group. 

“However, Canadians should be aware that real estate markets are volatile. Even though investing in your home is a great idea, you still need a balanced and well planned approach to saving for your long-term goals, such as retirement.” 

In Manitoba and Saskatchewan, the survey found that only 17 per cent are more enthusiastic about the stock market this year than they were last year. Another 37 per cent expressed less enthusiasm. Only 29 per cent believe the stock market will go up in the next 12 months, while 49 per cent said it will probably stay the same.

When deciding how much money to put in their RRSPs, Canadians indicated that their most important competing financial obligations were: reducing debt at 36 per cent; purchasing or renovating the home at 33 per cent; funding family expenses at 22 per cent; purchasing a car at 20 per cent; and purchasing recreational property at 12 per cent.

“It is encouraging that many RRSP investors are managing to squeeze more out of their cash flow — 39 per cent say they plan to increase their contribution over last year, and another 44 per cent say it will be the same,” said Ammeter. “Only 11 per cent expect to contribute less to their RRSP.” 

In Manitoba and Saskatchewan, those saying they will invest more in RRSPs were six percentage points above the national average, the highest in Canada and the same percentage as Alberta.

The poll results also indicate that Canadians have similar attitudes towards investing as they expressed this time last year, while demonstrating considerably more positive views than they held in the fall of 2002. Some 31 per cent expect the stock market to go up, while only nine per cent expect it to go down and 47 per cent say they think it will stay about the same.

Similarly, about 48 per cent of Canadians describe themselves as more or equally enthusiastic about investing in stocks and mutual funds this year than last year. That’s also an improvement over the 30 per cent who were equally or more enthusiastic compared to the prior year in 2002.

While the RRSP deadline is only four months away, a lot of Canadians are still delaying decisions about this year’s investment. Only 26 per cent of RRSP investors say they invest in their RRSP on a regular or monthly basis. Of the remaining RRSP investors, two-thirds (69 per cent) will wait until January or February to make their contribution. 

“I think that the last-minute nature of Canadians’ RRSP investment habits suggests that many Canadians make RRSP contributions for the tax savings they offer, rather than as part of a personal goal to ensure they will achieve their retirement dreams. 61 per cent of respondents told us they have not determined how much money they need to save for their retirement,” said Ammeter. 

“We advise clients to think about what they want to do in their retirement. It’s a lot easier to achieve a goal if you know what it is. Then you can enjoy the double benefit of working towards your goal and saving on taxes.”

The survey results are based on a Decima TeleVox national telephone survey conducted with a representative sample of 2,035 adult Canadians between September 11to 21. A sample of this size will provide results that can be considered accurate for the population overall to within plus or minus 2.2 per cent, 19 times out of 20.