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Old 08-22-2017, 09:50 AM   #1
Izzle
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Default Real estate doubling

Sorry for the vague title.

Over the weekend I heard from a few friends that the real estate (and thereby housing prices) in Canada doubles once every 10 years and that such a doubling up has not occurred since 2008 (the US recession). Therefore, they were looking forward to their housing properties doubling up soonish (within the next year or two).

I kind of find this ridiculous and was looking for evidence to support this. Unfortunately, my google sleuthing so far has come up naught.

Is it true that the Canadian real estate market doubles once every 10 years?
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Old 08-22-2017, 10:07 AM   #2
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Rule of 72. For an asset to double in ten years the average rate of return needs to be 7.2% per year.

So, I mean... no? 7.2% ROR is a somewhat aggressive estimate for stock market returns. Most people assume real estate will rise approximately with inflation, so 2-3% annually over time.

Maybe the era of ultra low interest rates has skewed that a bit, but not enough to say that real estate doubles every ten years in Canada no matter what.
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Old 08-22-2017, 10:18 AM   #3
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All real estate is local and depends on a number of factors, including the economy, interest rates, federal policies, and of course availability. I think it is a little naive to say it doubles every 10 years. In fact, over the last 20 years or so it has been more of a 7-year boom/bust cycle. Overall I would predict things to be fairly flat across the country over the next couple of years. The economy is improving, but interest rates are rising and federal policies are making it harder for people to qualify for mortgages.
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Old 08-22-2017, 10:25 PM   #4
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Without checking any data, I would bet the real estate markets in Toronto and Vancouver have doubled (or close to doubling) over the past 10 years. But I doubt the average annual increase in real estate in Calgary or Edmonton is much more than the rate of inflation. Depends on the market. I would also bet the odds of Toronto or Vancouver doubling again in the next 10 years is nil.
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Old 08-23-2017, 10:03 AM   #5
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Thanks everyone all your input. I had a gut feeling that "real estate doubling over 10 years" was kind of bogus.

I suppose it is also important to take out the Toronto and Vancouver markets as they are voluminous enough to skew data.

@Peanut, you had a very good point about the rule of 72.
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Old 08-23-2017, 11:50 AM   #6
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Quote:
Originally Posted by Izzle View Post
Thanks everyone all your input. I had a gut feeling that "real estate doubling over 10 years" was kind of bogus.

I suppose it is also important to take out the Toronto and Vancouver markets as they are voluminous enough to skew data.

@Peanut, you had a very good point about the rule of 72.
Real estate is local, some real estate doubles in 3 years. Other real estate go down, there is no general rule and no gains are guaranteed. Its silly to apply these theories to real estate that is actually in play.
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Old 08-23-2017, 02:21 PM   #7
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The rule of 72 isn't a theory, it's just math. Make your own estimate of how much your local real estate investment/purchase will gain in value, on average, over a period of time. If you think 3% gains on average, doubling time is 23.5 years. If you predict 10% annual gains on average, doubling time is 7.2 years. All I'm saying is the "10 year doubling" claim of the friend's of the OP implies an average rate of return over 10 years of 7.2% annually.

I have my own opinion about whether 7.2% annual ROR is a realistic assumption for a real estate investment in Calgary, but that's sort of beside the point.
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Old 08-23-2017, 06:34 PM   #8
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The best part is they believe some magical forces mean that real estate is due double in the next 2-3 years because it hasn't gone up much in the last 7!

Reminds me of the terrible radio commercial for removing debt ! "There are no bad ideas" "Magic"
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Old 09-06-2017, 03:30 PM   #9
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Quote:
Originally Posted by Izzle View Post
Thanks everyone all your input. I had a gut feeling that "real estate doubling over 10 years" was kind of bogus.

I suppose it is also important to take out the Toronto and Vancouver markets as they are voluminous enough to skew data.

@Peanut, you had a very good point about the rule of 72.
I thought it was you never lose money on your property value over 10 years not it doubling.
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