Your Home Is Not Your Best Investment
There’s a belief baked deep into the Canadian psyche: that residential real estate only ever goes up, and that owning a home is the smartest investment a person can make – smarter, even, than the stock market. It’s comforting. It’s repeated at every dinner party. And it’s mostly wrong.
Consider what’s actually happened. The national benchmark home price sits roughly 21% below its March 2022 peak, and in Toronto, sales recently bottomed at 25-year lows. That’s a significant, sustained drawdown – bigger than most equity-market corrections that send clients reaching for the phone. Yet when housing slides, no one panics. No one calls. The “for sale” sign just stays in the garage and life goes on.
That contrast tells you something important about how we relate to our investments, and it’s worth unpacking – because the lessons run in both directions.
Why Homeownership Feels So Good
Two things make owning a home psychologically powerful, and both are real advantages.
It’s forced savings. Somehow, you always find a way to make the mortgage payment. It’s the one “investment” almost no one skips, in good months and bad. That discipline is genuinely valuable – many people would never voluntarily set aside the equivalent amount every single month into a brokerage account.
You don’t check the price every day. Nobody pulls up their home’s market value over morning coffee the way they refresh their portfolio. And that’s exactly the point: if you’re not selling, the day-to-day number is noise. You do your homework up front – the right house, the right neighbourhood, the right fit for your life – and then you simply live there for years and worry about the price only when it’s time to sell.
Here’s the irony: that’s precisely how people should treat their equity portfolios, and almost no one does. The home teaches the right behaviour. We just don’t carry the lesson across the hallway.
Why the Returns Are Usually a Mirage
The trouble starts when we confuse a good lifestyle decision with a good investment.
People compute their “return” as the sale price minus the purchase price, and the number looks great. But that’s not the real return. It quietly ignores:
- Friction costs on the way in and out – land transfer tax, legal fees, and 4–5% in real estate commissions when you sell.
- Property taxes, year after year, for the entire holding period.
- Capital costs – the roof, the furnace, the windows, the kitchen, and the endless maintenance that a house demands just to stand still.
- Carrying costs – mortgage interest, insurance, and the opportunity cost of a large down payment that could have been invested elsewhere.
Add all of that back in, and the picture changes dramatically. Over a long holding period, the real, all-in return on a Canadian home is average at best. You would almost certainly have done better in a diversified market portfolio – not an exceptional one, just an average one – over the same stretch of time. We inflate the value in our minds and discount the costs out of existence, and the story we tell ourselves stops matching the math.
Where We Stand as Your Managers
We want to be very clear about something: we are huge proponents of real estate. We own plenty of it ourselves and hold it across client portfolios. It belongs in a well-built plan.
But as portfolio managers, we are deliberately agnostic to asset class. Real estate is one tool among many – equities, fixed income, private credit, real assets – and it should be sized, scrutinized, and held to the same standard as everything else. It does not get a free pass just because it’s the asset we happen to sleep in.
So here’s the reframe we’d offer:
Your home is a lifestyle decision, not an investment decision. Buy it because it’s the right place for your family, your work, and your life – and buy it expecting to stay a long time. Those are excellent reasons. “It’s guaranteed to make me money” is not one of them.
And purely on the numbers? For a great many people, renting and investing the difference is the better financial outcome. That’s not a popular thing to say in this country, but it’s true more often than the dinner-party consensus would have you believe.
The goal isn’t to talk you out of owning a home. It’s to help you see it clearly – as the lifestyle choice it is – so that the investment decisions get made with the same discipline we’d apply to anything else in your portfolio.