Investors hear it all the time: real estate is a sure thing. Or, at least, it’s as close to a sure thing as can be expected; safer than going for a white-knuckle ride on the stock market and seemingly simpler than muddling around with bonds and RRSPs.
Property values, proponents of this mantra like to say, only partly in jest, will keep going up so long as we’re making new people faster than we’re making new land.
This is, experts warn, an over-simplification, and one which creates risk for those who plan to use real estate to bankroll their retirement.
A recent report from the Bank of Montreal says almost one in three Canadians, upon finding they do not have enough money set aside to retire, have sold their homes in order to generate more cash — opting for a smaller house, condominium or rental unit.
Downsizing after one’s children move out makes sense. But financial planners warn that selling off real estate is no replacement for more conventional retirement savings, despite Canada’s healthy housing market.
“Memories are short,” says Peter Drake, vice-president of retirement and economic research at Fidelity Investments in Toronto. “That’s especially true [in real estate] where we’ve had a long, good run in most of Canada. People tend to assume just because something’s been true for two or three years that it’s always been true.”
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Source : http://www.cbc.ca/news
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