Quote:
Originally Posted by pseudoreality
What about the lost opportunity of having that capital tied up in real estate versus a diversified portfolio? That has to be part of the calculation. Well, that and risk of having it in one asset.
|
From a pure asset perspective, youre right. But if you take a broader view, id suggest the answer is a bit more nuance because you have to live somewhere, which is a liability. So in a way, owning a home is matching an asset (home) with a liabilty (need for shelter)
If you have strong roots to the city, then youre going to be exposed to the calgary real estate market for much of your future. If you own a home, your exposed via rising and falling home prices. If you rent, youre exposed via rising and falling rents for the rest of your life.
So either way you are exposed to the same risk, but renters and owners are on the other side of the table from each other. If you own, you get upside when the city does well. If you rent, you get upside when the city does poorly.
Given that due to rising population, positive inflation, and rising income levels, real estate prices are biased upwards over the long run, youre probably better off owning if youre going to living in the property a long time.
All that said, i think that view on home prices has become somewhat #######ized. Your home will depreciate over time (esp the finishings), while the land value increases. So all those building $1m+ homes might do a lot worse from a return perwpective than those building more modest homes.
But for a lot of people that is understood. Their home is also a consumption good, and owning does give you customization to consume exactly what you want while renting does not. And when youre making good money like many in this city, perhaps that is something - like a nice car, clothes, or vacations - you're willing to pay for.
Sent from my SGH-I337M using Tapatalk