Ask a Planner

By Jason Heath, CFP on May 12, 2025
Estimated reading time: 6 minutes

By Jason Heath, CFP on May 12, 2025
Estimated reading time: 6 minutes

I had three meetings this past week with Canadian clients where I challenged their real estate strategies. Here’s why.

Real estate investing has its merits. And certain markets have performed exceptionally well in Canada over the past generation. But sometimes, especially as you approach retirement, you should reconsider your real estate strategy.

Some Canadian investors look to real estate over stocks because they perceive real estate to be a better investment. I do not think it is better or worse—simply different.

This year has been a volatile one for stocks, and many think it’s been a bad time to invest in the markets. The S&P/TSX Composite Index has returned 3.53% including dividends year-to-date through May 9, and 16.75% over the past year. The S&P 500 in the U.S. has not fared as well, losing 6.40% year-to-date in Canadian dollar terms (in part due to the U.S. dollar falling) and returning 11.91% over the past year.

So, a North American–focused stock investor may be down slightly in 2025 but would have a double-digit return over the previous year.

If we zoom out further, the 10-year total returns for the Canadian and U.S. indices were 8.53% and 13.89% annualized. Most investors would have earned less, though, due to investment fees and by holding bonds as well as stocks. But high single-digit returns were certainly there for the taking.

How about residential real estate? The MLS Home Price Index aggregate composite change was 5.52% annualized over the past 10 years. A rental property investor in Canada might have earned 2% to 3% more from net rental income, based on rental income minus rental expenses excluding mortgage. Leverage would have helped, since the five-year variable mortgage rate averaged 2.79% over that 10-year period. Borrowing at 2.79% and investing at roughly 8% all-in leads to a profit.

As........

© MoneySense