Everyone seems to be bullish about real estate these days (Check out this New York Times article on real estate investing that sounds suspiciously like day-trading). I don’t know if real estate is a bubble waiting to burst. But, I do know that here in Ottawa, long-term returns for real-estate based on a 49 year price-history available with the Real Estate Board, not adjusted for inflation and not taking into account all the costs associated with real-estate like transfer fees, commissions, local taxes, maintenance, insurance, hydro, heating, water etc. is… 6.03%. Based on CPI data, inflation over the same period averaged 4.13%. An investment in the S&P 500 would have returned 6.16%, not including dividends. Even at today’s low dividend yield stocks will return an extra 1.8%. In summary:
Ottawa Real Estate: 6.03%
Inflation: 4.13%
S&P 500: 6.16% + dividends.
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