Canadian Real Estate vs. Stocks: Historical Performance (1990-2024)

Canadian Real Estate vs. Stocks: Historical Performance (1990-2024)
June 20, 2024

For generations, Canadians have viewed real estate as a cornerstone of wealth creation. It's been seen as a stable investment, offering a place to live and the potential for significant appreciation. But a recent report by BMO throws a wrench into this traditional thinking. Here, we'll delve into the historical performance of Canadian real estate compared to the Toronto Stock Exchange (TSX) over the past 34 years (1990-2024), unpacking the numbers and exploring the considerations for investors.

Real Estate Performance

  • Long-Term Growth (1990-2023): The national average house price in Canada has seen significant growth. According to the Canadian Real Estate Association (CREA), prices ballooned from $120,200 in 1990 to $827,100 in December 2023. This translates to an impressive average annual increase of 6.3%. However, it's crucial to dissect this figure further.
  • The Golden Years (1990-2007): The early years of this period witnessed a real estate boom. Fueled by low-interest rates and a growing population, average house prices skyrocketed by an annual average of 8.5%. This period cemented the perception of real estate as a surefire path to wealth.
  • The Moderation Era (2008-2023): The 2008 financial crisis ushered in a period of slower, but still steady, growth. The average annual increase dipped to 4.8% during this time. This highlights the impact of external factors on real estate markets.
  • The Recent Slowdown (2023-2024):  It's important to acknowledge the most recent trend – a slowdown in price appreciation. The CREA HPI (House Price Index) has dipped in recent months, with year-over-year growth in April 2024 at -0.9%. This marks a significant shift and raises questions about the future trajectory of Canadian real estate prices.

Regional Variations

The national average paints a broad picture, but real estate performance varies considerably across Canada. Major metropolitan areas like Toronto and Vancouver have witnessed much steeper historical growth compared to smaller towns and rural regions.

For instance, the average house price in Toronto in 1990 was around $230,000, while in April 2024, it sits at a staggering $1.4 million, reflecting a staggering annual growth of nearly 7.8%. In contrast, a smaller city like Regina, Saskatchewan, saw prices rise from $105,000 in 1990 to $321,000 in April 2024, translating to a more modest annual increase of approximately 4.2%. These regional discrepancies highlight the importance of considering location-specific data when evaluating real estate as an investment.

Stock Market Performance

The S&P/TSX Composite Index, a broad market indicator for the TSX, has delivered a compelling average annualized return of 7.9% over the past 34 years (as of May 2024). This figure factors in both capital appreciation (stock price increase) and reinvested dividends, which are a portion of a company's profit distributed to shareholders, providing additional returns.

However, unlike the relative stability of real estate, the stock market is inherently volatile. Stock prices can fluctuate significantly in the short term, leading to periods of significant losses. The 2008 financial crisis, for example, saw the TSX plummet by nearly 40%. Yet, historically, the market has exhibited a tendency to trend upwards over the long term, rewarding investors who stay invested.

Beyond the Numbers

Understanding the factors influencing these investment options is crucial. Here's a breakdown of some key considerations:

  • Interest Rates: Interest rates significantly impact real estate affordability. Lower rates make borrowing money for mortgages cheaper, fueling demand and driving up prices. Conversely, higher interest rates can dampen affordability and cool the market.
  • Government Policies: Government policies like foreign buyer taxes and housing supply initiatives can influence real estate markets. Restrictions on foreign investment, for instance, can impact demand in certain areas.
  • Economic Conditions: A strong economy with a growing population typically leads to increased demand for housing, putting upward pressure on prices. Conversely, economic downturns can lead to stagnant or declining prices.
  • Company Performance: Stock market performance is directly tied to the success of individual companies and the overall health of the economy. Strong corporate earnings and economic growth tend to translate to rising stock prices.

Weighing the Pros and Cons

Real Estate

  • Pros:
    • Tangibility: You own a physical asset with the potential for appreciation and rental income generation.
    • Hedge Against Inflation: Over the long term, real estate has historically kept pace with inflation, offering a degree of protection against rising costs.
    • Potential for Leverage:  Mortgages allow investors to leverage their investment, potentially magnifying returns.
  • Cons:
    • Low Liquidity: Selling real estate can take time and involve significant transaction costs.
    • Management Responsibilities: Landlords are responsible for maintenance, repairs, and potentially dealing with vacancies.
    • Sensitivity to Local Market Conditions: Real estate performance can be highly localized, making diversification across regions crucial.


  • Pros:
    • High Liquidity: Stocks can be easily bought and sold on the stock exchange.
    • Diversification Potential: Investors can spread their risk across various companies and sectors.
    • Potentially Higher Returns: Historically, stocks have offered higher average returns compared to real estate.
  • Cons:
    • Volatility: Stock prices can fluctuate significantly, leading to short-term losses.
    • Requires Research and Monitoring:  Investing in stocks requires ongoing research and analysis to make informed decisions.
    • No Guarantee of Returns: Unlike real estate with its potential for rental income, stocks don't offer guaranteed returns.

The Verdict

It's Not a One-Size-Fits-All Answer. BMO's report highlights a shift in the historical performance landscape. While real estate has provided solid returns, the recent slowdown and the TSX's outperformance compel investors to re-evaluate their strategies.  Ultimately, the "better" investment depends on your individual circumstances and risk tolerance.

Considerations for Investors

  • Investment Horizon: Real estate might be better suited for long-term investors who can ride out market fluctuations. Stocks can be more volatile but offer potentially higher returns, especially for those with a longer investment horizon (generally 10+ years).
  • Risk Tolerance: Real estate is generally considered a lower-risk investment than stocks. However, factors like vacancy rates and property maintenance costs can impact returns. Stocks can be much more volatile, and investors should be comfortable with potential losses in the short term.
  • Investment Goals: Are you looking for income generation, capital appreciation, or a combination of both?  Real estate can be a good option for building wealth and generating rental income. Stocks may be more suitable for long-term capital appreciation.

The Path Forward

Consulting with a qualified financial advisor can help you develop a personalized investment strategy that considers your goals, risk profile, and financial situation. They can help you create a diversified portfolio that incorporates both real estate and stocks, depending on your needs. Remember, this is just a starting point. Thorough research and professional guidance are crucial before making any investment decisions.

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