Real Estate vs. Stock Market: Where Should Canadians Invest in 2024?

Last updated: 2025/01/26 at 11:36 PM

Irfan Ameer

7 Min Read

Are you looking for investment opportunities for 2024? This is one major question that can be difficult for Canadians to answer, especially when choosing between real estate and the stock market.

Contents

What About the Stock Market?The Risks of the Stock Market Real Estate vs. Stocks: Which One’s Right for You?Interest Rates Liquidity What Should Canadians Do in 2024?

Both cases have advantages, but they also have disadvantages. As 2024 draws near, it is the right moment to evaluate which investment would be worth your time and money. Some prefer real estate, and many also look towards the stock market. Without wasting any time, let us examine the specifics.

The Affection Canadians Have For Real Estate Investments

Real estate is always regarded as an investment asset in every Canadian market. Simply put, it is easy to get rich investing in real estate. How come? There is an inherent asset that one acquires – that is tangible and not easily accessible.

There is also the thought that property will always be appreciated in the long run. The most recent figures from The Canadian Real Estate Association (CREA) indicate that during that period, average house prices in Canada increased from $120,200 to $827,100. That means, on average, an annual growth rate of 6.3%.

But here’s the thing: the real estate market isn’t always the smoothest one.

The Boom Years: 1990 to 2007

Canadians, as far as the real estate business is concerned, did it all between the years 1990 and 2007. The annual increase in prices averaged 8.5%. Homes were in demand due to the low interest rates and the increasing population. For this period, most Canadians thought that their dreams of owning a piece of land in the form of real estate would always come true. If you purchased a home, it should be worth more in a few years.

Slower Growth: 2008 to 2023

However, the situation changed after the 2008 economic downturn. From 2008 to 2023, the scenario showed that real estate growth remained, although at an approximate rate of 4.8% per annum. During this period, I learned that while real estate investment brings growth, it does not shield investors from severe economic problems. People should not always expect high returns from it.

Recent Changes: 2023 to 2024

Moving forward, I am a couple of years ahead in terms of the current year, 2022 -1, and the housing crisis in Canada. In 2024, CREA topped the report by including that housing costs had gone down by 0.9% relative to one year before. This represents a great shift. It makes one wonder if real estate is still the kind of safe investment it has always been.

What About the Stock Market?

Now, let’s switch gears and talk about the stock market. The S&P/TSX Composite Index, which measures the Toronto Stock Exchange (TSX), has grown by an average of 7.9% per year over the past 34 years. This includes stock price increases and dividends, which are profits companies pay their shareholders.

While the stock market offers higher returns on average, it’s also much more volatile. Unlike real estate, where prices tend to move steadily, stock prices can change a lot in a short period. For example, during the 2008 financial crisis, the TSX dropped nearly 40%. It took a while to recover, but long-term investors who held onto their stocks saw their portfolios bounce back.

The Risks of the Stock Market

One of the biggest risks with the stock market is its unpredictability. Prices can go up and down quickly. You might see your investment grow one day only to see it shrink the next. But over time, the stock market has generally trended upward.

Another thing to remember is that investing in the stock market requires more attention. You need to research companies, watch market trends, and keep an eye on your portfolio. It’s not as hands-off as real estate can be.

Real Estate vs. Stocks: Which One’s Right for You?

So, how do you choose between real estate and stocks? Here are a few things to consider.

Interest Rates

Interest rates have a big impact on both real estate and stocks. When interest rates are low, borrowing money is cheaper, which can drive up real estate prices. But when rates rise, like recently, mortgages become more expensive, which can cool the housing market. Interest rates also affect stocks, but usually in a different way. Higher rates can make borrowing more expensive for companies, slowing growth and lowering stock prices.

Liquidity

Stocks are a lot easier to buy and sell than real estate. You can trade stocks quickly, often within minutes. Real estate, on the other hand, is much less liquid. Selling a property can take months, and you’ll have to deal with closing costs and fees. If you think you’ll need quick access to your money, stocks might be a better option.

What Should Canadians Do in 2024?

So, where should you invest your money in 2024—real estate or the stock market? Both options have their pros and cons. Real estate is a more stable investment and gives you something tangible, like a house. However, recent slowdowns in the housing market mean you might not see the big returns people saw in the past. The stock market, on the other hand, offers higher potential returns but comes with more volatility and risk.

At the end of the day, the choice depends on your financial goals and how much risk you’re willing to take. Real estate might be the better option if you prefer something more stable. But the stock market could be the way to go if you’re looking for higher growth and can handle some ups and downs.

Here’s a thought: You don’t have to choose just one. A balanced approach—investing in real estate and stocks—could give you the best of both worlds. Talk to a financial advisor to help you create a plan that fits your needs.