16 - Friday, November 14, A CARL UL analysis of the Canadian residential real estate market confirms that housing is an excellent in- vestment over the long term, says William A. Dimma, Deputy Chairman - Royal LePage Limited. However, individuais who enter the market purely for speculative purposes could spend some sleepless nights, warns Dimma, a featured writer in the Royal LePage 1987 Market Survey. “While housing, over the longer term, is an excellent investment, it is subject to short-term price fluctuations — sometimes drastic — in both directions. This makes it an unpredictable and therefore dangerous invest- ment for speculative pur- poses, particularly for those who like to sleep at night,”’ cautions Dimma. UPWARD TREND Having said that, Dimma stresses that an examination of average house prices in various centers across Canada supports the conten- 1986 - North Share News tion that a long-term up- wards price trend is ‘strong and unmistakable."' Using the Toronto hous- ing market as an example (primarily because Toronto has real estate price records over a longer time frame, thus lending added reliability to the analysis), Dimma concludes that housing, as an investment, appreciated, net of all financing and lost opportunity costs, over the previous two decades. “The bottom fine is that an investment in Toronto housing appreciated, net of all financing and lost oppor- tunity costs, at a rate of 1.7 per cent per year, or by 38 per cent ever the past 19 years,’’ he says. In addition, home owner- ship proved to be an effec- tive hedge against inflation. “A Toronto homeowner over the 1966 - 1985 period realized an annual return on his/her residential invest- ment which averaged nearly 5 percentage points higher than the annual rate of in- flation,’’ says Dimma. While the market tends to follow these trend lines over the longer term, it can be subjected to dramatic price swings from time to time. PRICE SWINGS To iHustrate the wide price fluctuations that can take place within the market, Dimma points to the upward movement in Toronto house prices from the middle of 1985 to the middle of 1986. “In that period, prices rose by an average of 32 per cent and by a startling 60 - 70 per cent on most larger, more expensive houses in, or near, the city core. This is a classic example of a major aberration from longer-term trends. It also is cause for concern.” Explains Dimma: ‘‘Such a powerful upsurge in prices cannot be sustained in- definitely and will almost certainly be offset by cyclical price declines at some point in the future. All cycles, no matter how much they deviate from longer-term trend lines on either the up- side or the downside, even- tually return to and follow those trend lines.” 4 #29 fl Behind this house is a 200 ft. Hydro Easement. A50 ft. Green Belt, then new home development & Ef & gardens - 2 BR apt. - a Hurry! 706 EAST 7th STREET 984-0421 THE SMART ONES! 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