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The average resale home in Canada appreciated by an average annual 6.8 per cent over the past 10 years, better than triple the average inflation rate over that stretch.

That’s a strong return for sure, but not as good as either the Canadian or U.S. stock markets. In this real estate obsessed country, it’s never a bad idea to point out that wealth can reliably be made away from the housing market.

It might even be a public service to offer some perspective on house prices right now. Prices soared in 2021 and then pulled back last year as interest rates rose. But there are signs this spring of rebound potential in the real estate market. How long until housing mania reignites?

Looking back over the 10 years to Dec. 31, let’s see how houses have compared to stocks. The S&P/TSX composite index produced an average annual gain of 7.74 per cent for those 10 years. With a low-cost exchange-traded fund tracking this index, your return would have been about 7.69 per cent. U.S. stocks were even better – the S&P 500 made 15.73 per cent in Canadian dollars for the past 10 years. That leaves you with about 15.68 per cent with an ETF tracking the S&P 500.

Data from the Canadian Real Estate Association documents the housing market’s annualized 6.8 per cent gain for the 10 years to Dec. 31. Some cities would have done better, some worse. But with inflation running at an average 2 per cent over those 10 years, housing can be said to have delivered in a big way.

Another reason to look favourably at housing as an investment is that a principal residence can be sold tax-free. The average national resale prices in 2012 and 2022 were $363,779 and $703,875, respectively. The $340,096 differential here would be reduced only by real estate commissions and closing costs.

Stock market investing isn’t as tax-friendly. You can invest in stocks in a tax-free saving account, but there’s an annual contribution limit that comes in at $6,500 for 2023. You can also backfill unused contribution room you were entitled to in previous years.

In a nonregistered account, you benefit from the dividend tax credit and the 50 per cent inclusion rate on capital gains. But tax will erode your returns to at least some extent.

Where stock market wealth beats real estate wealth cleanly is in liquidity. You can sell a stock or withdraw some accumulated dividends and have the money in your chequing account in a few days. Home equity must be accessed through either a home equity line of credit or reverse mortgage, which means paying interest. Or, you must sell and find somewhere cheaper to live.

There’s little point picking a winner between stocks and real estate for generating wealth – it depends on your personal circumstances. But let’s at least acknowledge that over a decade where house prices soared, stocks did a little better.

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