Interesting article. Lines up with what I suspected. It is polled data though so always worth questioning.
It is interesting that their conclusion is to aim for at least 40% of net worth in stocks. That can be very hard to do with current house prices. Do you downsize your house to try to get that balance? Pull a huge secured loan against the house to get the balance? The author provides no insight on how to achieve that balance. I think that is because there is no magic. You have people that own dwellings that are mostly very overweight in housing and those that don't own dwellings that are very overweight in more liquid/conventional investments like stocks.
Just for fun, assume a first time buyer looking at an Toronto average condo (700K). Assume 20% down (140K cough). Assuming that 140 was 60% of your net worth, it is smart to leave 90K invested in stocks while sitting on a 560K mortgage? Maybe? Doesn't seem like the right solution for many though (especially since a 235K net worth is nothing to sneeze for a first time buyer). If they had less saved the percentage will be swung even further towards housing (for most first times buyers close to 100%). Looking at an established owner that bought long ago, their house could easily be worth 2M+. Sure they have investments but are the investments worth 2M+? Do they move to a condo or another city to rebalance their portfolio? Do they pull a 1M mortgage to invest (probably won't be granted based on income)? I don't think so. Most will ignore most of the money trapped in their house and enjoy life. It's almost funny money as it's so hard to use a substantial portion of it. Hell, I am trying to keep some leverage up on the house but at some point the bank is going to tell me to screw off as income doesn't support the size of the loan.
"An Ipsos poll of 18,000 people documents how much of this country’s total household assets are tied up in real estate. For all Canadians, it’s 77 per cent. Generationally, real estate’s share of assets ranges from lows of 68 per cent for seniors and 71 per cent for boomers to a high of 89 per cent for the young adults of Gen Z.
A 50-50 blend of real estate and traditional investments would be ideal, but 60-40 in favour of real estate is more realistic in light of the Ipsos findings.
A bonus of also holding stocks and bonds: You can sell them with a mouse-click and get access to your money. It’s way more complicated to turn a house into cash you can use."
It is interesting that their conclusion is to aim for at least 40% of net worth in stocks. That can be very hard to do with current house prices. Do you downsize your house to try to get that balance? Pull a huge secured loan against the house to get the balance? The author provides no insight on how to achieve that balance. I think that is because there is no magic. You have people that own dwellings that are mostly very overweight in housing and those that don't own dwellings that are very overweight in more liquid/conventional investments like stocks.
Just for fun, assume a first time buyer looking at an Toronto average condo (700K). Assume 20% down (140K cough). Assuming that 140 was 60% of your net worth, it is smart to leave 90K invested in stocks while sitting on a 560K mortgage? Maybe? Doesn't seem like the right solution for many though (especially since a 235K net worth is nothing to sneeze for a first time buyer). If they had less saved the percentage will be swung even further towards housing (for most first times buyers close to 100%). Looking at an established owner that bought long ago, their house could easily be worth 2M+. Sure they have investments but are the investments worth 2M+? Do they move to a condo or another city to rebalance their portfolio? Do they pull a 1M mortgage to invest (probably won't be granted based on income)? I don't think so. Most will ignore most of the money trapped in their house and enjoy life. It's almost funny money as it's so hard to use a substantial portion of it. Hell, I am trying to keep some leverage up on the house but at some point the bank is going to tell me to screw off as income doesn't support the size of the loan.
Our other real estate problem – people have too much wealth tied up in houses
Real estate’s share of assets ranges from lows of 68 per cent for seniors and 71 per cent for boomers to a high of 89 per cent for the young adults of Gen Z
www.theglobeandmail.com
"An Ipsos poll of 18,000 people documents how much of this country’s total household assets are tied up in real estate. For all Canadians, it’s 77 per cent. Generationally, real estate’s share of assets ranges from lows of 68 per cent for seniors and 71 per cent for boomers to a high of 89 per cent for the young adults of Gen Z.
A 50-50 blend of real estate and traditional investments would be ideal, but 60-40 in favour of real estate is more realistic in light of the Ipsos findings.
A bonus of also holding stocks and bonds: You can sell them with a mouse-click and get access to your money. It’s way more complicated to turn a house into cash you can use."