Is Real Estate Still a Worthwhile Investment?

A notable pattern I’ve frequently observed within our real estate market is the constant vigilance of a select group of individuals and investors, all poised for new acquisition opportunities. However, some prospective clients, taking cues from renowned investors such as Warren Buffett and the advice of their bankers or accountants, harbour reservations about further committing to the real estate sector. In fact, Warren Buffett has even called real estate a lousy investment.

Link : Warren Buffett Says Real Estate Is a Lousy Investment: Why He’s Wrong | The Motley Fool

Nevertheless, when we step back to examine the bigger picture, the narrative shifts dramatically. In 1963, the average house price in Canada was $15,229 (source: untitled (

Canada’s inflation rates have fluctuated in the years since, with the average annual inflation rate being 3.87%, and the median rate, 2.71%.

Source: Inflation rates in Canada (

What should a home bought in the 1960s be worth today in Canada?

A pertinent question for real estate investors arises: If a house was bought at the average Canadian price in 1963, what would its value be in 2022? The calculations, based on the aforementioned inflation rates from 1963 to 2022, lead to a surprising answer. The projected average house price for 2022 stands at $135,968, a stark contrast to the current real average home price in Canada of $664,936 (source: CREA | National Price Map ).

So, what can we infer from this significant disparity? Why has the average home price increased 44-fold in Canada since 1963, while the inflation data suggests it should have risen by around 9 times? Explanations often involve theories of supply and demand, declining interest rates, urbanization, foreign investment, and economic growth. However, these interpretations don’t entirely account for the observed reality. The key to understanding this discrepancy lies in analyzing our money supply.

The money supply analysis and explanation

The money supply – which comprises the new currency introduced into the economy – has experienced a dramatic surge, as indicated by the M0, M1, and M2 charts (see below). In other words, our currency has been debased, or diluted, due to the influx of new money into the system.

M0 Money Supply

M1 Money Supply

M2 Money Supply


Returning to the initial question: Is investing in real estate worthwhile? The answer depends on whether the investor wishes to keep pace with this economic currency debasement. If so, real estate investing becomes an effective safeguard. Not only does it present a means to build wealth over time for one’s family and future generations, but it also serves as a potent defense mechanism against currency debasement.


Navigating the Shift in Commercial Real Estate: Multifamily Investing Amid Rising Interest Rates

In the multifaceted world of commercial real estate, one component that often catches investors off guard is sudden policy changes. In March 2022, the central banks of the Western world adopted an aggressive stance against inflation, hiking short-term policy rates. While the efficacy of this strategy is up for debate, the ripple effect on the bond and mortgage markets was undeniable, leading to an uptick in the 5-year and 10-year bond rates.

The commercial real estate sector, with its brokers and multi-family investors, felt the shock waves of these changes.

Notably, even with the generally favorable CMHC insured mortgages available to apartment building owners, we still witnessed a significant surge in rates from March 2022 onward. So, how can multifamily investors who are acquiring properties in this shifting landscape safeguard their investments?

Unlocking the Success Matrix in Multifamily Investing

The success matrix for a multifamily investor boils down to an important aspect: the property’s rent potential. Ensuring the targeted property has a considerable upside in current rents is crucial. This not only provides a buffer for potential management missteps but also equips the investor with protection against future interest rate hikes.

Let’s consider a typical urban property, presuming there’s no immediate need for substantial capital improvements. If there’s a 50% upside potential (or more) in the rents and the property is purchased at a fair market value, with a 4.25% capitalization rate and a 4.8% 5-year CMHC insured mortgage rate, the investment’s outlook is extremely positive.

For example, a property with gross revenues of $200,000 and a 40% expense ratio, generates a net operating income of $120,000. If the investor can realize 70% of the rent upside over five years, a property purchased for $2,823,529 in 2023 could be worth $3,811,764 by 2028, assuming a constant 4.25% cap rate. This implies a 35% property value appreciation and an impressive 89% equity appreciation,

given a 57% loan-to-value ratio and a 43% down payment. This is a very plausible scenario within our multifamily investing landscape, even without considering potential inflation effects on rental rates.

The Evolving Landscape of Commercial Real Estate and Multifamily Investing

The commercial real estate sector, particularly multifamily investing, is no stranger to frustrations. The low-interest days during the Covid-19 environment are gone, but opportunities still abound. The current landscape sees a mix of sellers wanting to offload properties and long-term investors hunting for viable deals. The secret to succeeding as a multi-family investor lies in purchasing properties with promising rent upside at fair market prices, and just managing the properties over the long run.

At Baron Realty, we excel in bridging the gap between buyers and sellers of apartment buildings. We deliver top-tier boutique-brokerage services for apartment transactions in the Ontario and Quebec markets.


The real reason there are less real estate investors today

This week, I came across a fascinating article on a significant shift in investment trends.

The article discussed the results of a survey which showed a decline in the popularity of real estate investing among 1,013 U.S. adults, falling from 45% in 2022 to 34% in 2023. It’s worth noting that similar figures are likely to be seen in Canada.

Real estate has historically held appeal for many investors, but its popularity can and will plummet when aligned with a cycle of rising interest rates.

Unpacking the Underlying Issue

Post-Covid-19 events that unfolded globally (including government stimulus packages, global lockdowns, and supply chain issues) triggered intense inflationary pressures. Central Banks, like the US Federal Reserve, responded with rapid short-term interest rate hikes to curb inflation.


For instance, the US FED Funds rate saw ten consecutive increases from March 2022, skyrocketing from 0.25% to 5.25% – a 2,000% increase over 14 months.

Given the size of the US economy, which represents 24% of the global economy (note 1), other central banks had to follow suit.  The Bank of Canada, fearing capital flight and potential currency devaluation, mirrored the US FED’s strategy, pushing its policy rate from 0.25% to 4.25% – a staggering 1,700% increase in the same period.

These unprecedented short-term interest rate hikes significantly impacted bond markets and, by extension, mortgage interest rates for borrowers, affecting the viability of real estate investing significantly.

Consider an investor owning a building with a net operating income of $100,000. In February 2022, the property could support a refinance mortgage of $1,646,450. (Amortization 35 years, mortgage rate of 3.10%). Now, due to these changes, the property can only sustain a mortgage of $1,334,280 (mortgage rate increased to 4.66%) — a nearly 20% drop.  This drastic decrease in refinancing capabilities significantly dampens the enthusiasm of real estate investors, explaining the dwindling popularity of this investment avenue, particularly in robust asset classes like multifamily properties, the situation is compounded. Sellers in these sectors are typically disinclined to part with their assets unless they are offered a satisfactory selling price.

Unearthing Additional Issues

Undeniably, there are other factors at play contributing to the current real estate climate. Certain real estate sectors, like office properties, have experienced a surge in vacancy rates over the past few years. The rise of remote work culture among many companies has dramatically altered the landscape of office demand, subsequently affecting investors’ borrowing power. Similarly, the retail real estate sector has long been grappling with its own challenges.

The escalating competition from online shopping, amplified by the impact of the recent Covid-19 lockdowns, has forced many smaller retail stores to shutter or drastically cut down their sales volume.

The Path Forward

Despite these hurdles, the solution for real estate investors remains straightforward. Real estate continues to be a powerful tool for wealth creation and inflation hedge.

Its unique appeal: banks can lend against it, providing investors with the leverage needed to grow their portfolios.


In our inflationary environment that has started climbng since 2021, it’s more important than ever for property owners to enhance their property’s financial health. Property owners must treat each property as an individual business entity. Just as public companies strive to generate returns for their shareholders, so should real estate owners view their properties. By providing superior services and amenities to tenants, property owners can improve their property’s financials. Each incremental increase in net operating income directly elevates the property’s value.

Thus, regardless of interest rates or wider economic conditions, a proactive property owner can still thrive.

Note 1 source:

Mikael Kurkdjian, the broker of record (AEO in Quebec) with Baron Realty and licensed real estate broker in the Quebec and Ontario markets in Canada. Mikael is also a multifamily real estate investor himself.


Baron Realty / Immobilier Baron
400 – 6500 Transcanadienne
Pointe-Claire, Québec H9R 0A5
Telephone: 514 932 9000


Baron Realty, Brokerage
303-225 Duncan Mill Road
Toronto, Ontario M3B 3K9
Telephone: 416 301 3931

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