Real Estate

In light of recent erroneous claims from the real estate industry that real estate has averaged an 11% return over the last 25 years (it has actually averaged 5.3% before accounting for inflation), we thought we should provide a little more information about real estate as an investment. Especially since, for most people, their home is their largest single asset.

The links, below, show that if you invested in real estate 17 years ago during the 1990 real estate bubble, your returns are barely breaking even. The US housing market is even scarier. As with the other markets, timing is important.

We certainly believe in owning your own home, for security and for peace of mind. But please don’t think of it as an investment or growth vehicle. It is a place to live. The theoretical return you get on it is the rent you would otherwise pay to live in a comparable property (less the interest costs on your mortgage, of course). While your home's value can yeild about 3% after adjusting for inflation, your costs of home improvements, annual taxes, insurance and other expenses generally exceed 3% a year. This makes the MERs on your mutual funds begin to look like a bargain, especially in light of the higher returns over 10, 15 and 25 year time horizons.

Now some would say in light of this, that you should clearly borrow against your home to invest in the markets. You could even make your mortgage tax deductible. We don’t necessarily share that view due to the increased leverage and risk invovled. However, we do suggest that saving in your RRSP is a higher priority than paying down your mortgage, and we would be pleased to look at the pros and cons of investing outside your RRSP if you want to look at higher growth vehicles like some of our real estate mutual funds.

More on real estate

• Managed Money Reporter Issue 235
• Managed Money Reporter Issue 212
• AGF - Real Estate Perception vs. Reality
• Templeton - Real Estate 2006
• Trimark - Real Estate
• Slides from a recent presentation given by your advisors
• Canadian Capitalist - Real Estate Returns

Real Estate Funds Available Through ScotiaMcLeod & Their Performance

Mutual Fund	1 Year (%)	2 Year (%)	3 Year (%)	5 Year (%)	10 Year (%)	Risk *	Min Invest ($)	MER
AGF Global Real Estate Equity	-7.66	0.56	6.41	-9.04	2.64	19.14	500	3.29
CIBC Canadian Real Estate	6.01	14.43	21.97	0.56	8.69	11.77	500	2.96
Counsel Global Real Estate Series A	-7.16	2.10	na	na	na	na	na	2.89
Criterion REIT Income Cl A	20.22	na	na	na	na	na	na	2.50
Desjardins Global Real Estate	-6.83	0.88	6.06	na	na	18.21	na	2.71
Desjardins Global Real Estate T Class	-6.62	1.09	6.09	na	na	18.06	na	2.71
DFA Global Real Estate Securities Cl A	2.37	8.49	9.28	na	na	19.72	na	1.75
Dynamic Global Real Estate	2.89	7.06	14.66	-1.24	7.88	11.26	500	2.46
Dynamic Global Real Estate Series T	2.83	7.06	14.68	na	na	11.23	na	2.50
Fidelity Global Real Estate Class Sr A	-6.90	2.22	6.74	na	na	19.22	na	2.63
Fidelity Global Real Estate Class Sr B	-6.73	2.42	6.95	na	na	19.18	na	2.44
Fidelity Global Real Estate Series A	-7.01	2.25	6.88	-10.46	na	19.35	500	2.60
Fidelity Global Real Estate Series B	-6.83	2.46	7.09	-10.29	na	19.35	500	2.40
Invesco Global Real Estate	-6.29	1.44	4.59	na	na	18.00	na	2.55
Invesco Global Real Estate T4	-6.34	1.39	4.55	na	na	17.99	na	2.61
Invesco Global Real Estate T6	-6.32	1.40	4.56	na	na	17.99	na	2.59
Invesco Global Real Estate T8	-6.56	1.26	4.46	na	na	18.03	na	2.54
Mac Universal World Real Estate Cl	-6.45	0.80	4.61	-14.40	na	18.30	500	2.58
Manulife Global Real Estate	-12.74	-2.10	6.19	na	na	18.79	250	3.30
Manulife Global Real Estate Class	-13.58	-2.21	6.25	na	na	18.71	250	3.43
Middlefield ActiveIndex REIT Class A	na	na	na	na	na	na	na	na
Sentry REIT	10.10	16.10	22.58	-0.12	7.72	9.87	na	2.75
United Real Estate Investment Corp Cl A	-9.64	-0.31	4.77	na	na	21.08	na	3.39
United Real Estate Investment Pool Cl A	-9.67	-0.26	4.48	-10.35	na	21.53	na	3.28

24 Funds Returned    For Periods Ending: 12/31/2011

 

Click on a fund name for more information on that fund.

 

* Risk is the volatility of returns, see risk calculations.

All these funds are available through ScotiaMcLeod. Certain funds may have large minimum investments, sales charges, loads or administrative fees etc, or may not be available for PAC plans, SWP plans or payroll deduction.  Please contact us for details and recommendations regarding the right funds for your portfolio.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The indicated rate(s) of return is (are) the historical annual compounded total return(s) including changes in (share or unit) value and reinvestment of all (dividends or distributions) and does (do) not take into account sales, redemption, distribution or optional charges or income taxes payable by any security holder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. See more disclaimers ...