Investors look to the market for growth as real estate enthusiasm dampens
New poll shows drop in number of Canadians who believe their home will grow more in value than their investments; majority will maintain or increase their RRSP contributions this year.
Winnipeg – November 13, 2006: Investors are increasingly turning to the stock market—and their RRSPs—for growth as the real estate “enthusiasm bubble” lets out some air, according to a poll released today by Investors Group.
“Bricks and mortar are no substitute for stocks and bonds. While your home is certainly an investment, it is not a replacement for careful, long-term retirement planning,” says Debbie Ammeter, Vice-President of Advanced Financial Planning Support at Investors Group. “It is encouraging that Canadians are placing less emphasis on their real estate assets as a primary source of growth over the long-term. We know that RRSPs are an important component of retirement planning, and the results show Canadians are committed to investing in their RRSPs.”
The poll [ DOC: 230 K / 3 pages ], conducted by Decima Research, found that Canadians intend to contribute more to their RRSPs. Two-thirds of Canadians who have RRSPs expect to contribute as much or more to their RRSP this year as they did in the 2005 tax year. In fact, a greater proportion of respondents are expecting to increase their contributions this year (31 per cent versus 26 per cent in 2005).
Twenty-nine per cent of respondents say they do not currently have money invested in an RRSP or a RRIF, but of these respondents, 15 per cent plan to start contributing to an RRSP before March of next year.
Market sentiment remains very positive, with only eight per cent of respondents saying they plan to leave their RRSP contribution in cash. Forty-three per cent plan to invest in the stock market via mutual funds, and another six per cent plan to invest directly in the market via stocks.
Canadians in the “baby-boom” generation are also strongly focused on equity investing with only 6 percent of respondents in the 45-64 age group saying they will leave their RRSP contribution in cash.
“Canadians' long-term return market expectations are reasonable and realistic,” says Ammeter “Our research shows that 43 per cent of respondents expect a long-term investment return between five and ten per cent, which is in line with how we've seen the market perform historically.”
Canadians are less positive than they have been in the past about the ongoing growth potential of their real estate investments. Approximately half of non-retired Canadians surveyed believe their real estate assets will grow more in value than their other investments over the next 10 years. This is a decrease from the 65 per cent of Canadians who believed the same last year. Canadians' expectations are moving closer to what history has shown to be true. Historically, residential real estate values have not increased as fast as the Toronto Stock Market Index (TSX). In the most recent 10 year period for which statistics are available (1995 to 2005), the average residential real estate sale price increased an average of just over 5 per cent per year according to the Canadian Real Estate Association, while TSX returns have averaged 11 per cent per year.
In spite of the apparent cooling of enthusiasm for real estate growth, 51 per cent of Canadians say they are relying on their home as one of their sources of retirement income. Among baby boomers, 55 per cent say their home will provide some of their retirement income.
Other highlights include:
- The one exception to the trend of declining real estate enthusiasm is in Alberta, where 72 per cent of respondents believe growth in their real estate assets will outpace growth in their investment portfolios.
- A greater percentage of Atlantic Canadians (41 per cent) and Albertans (40 per cent) plan to contribute more to their RRSP this year than they did in the 2005 tax year (compared with 31 per cent of all Canadians)
- At least twice as many Quebecers plan to leave their RRSP contributions in cash (16 per cent) compared to the rest of Canada (8 per cent), as a whole and province-by-province. Interestingly, Quebecers are also less positive about future market performance. Nearly a quarter of Quebecers (23 per cent), compared with 14 per cent of all Canadians, think the Canadian stock market will go down over the next 12 months.
- Housing affordability is having an impact: 23 per cent of respondents say that costs of owning a home will cause them to reduce their RRSP contributions this year.
- The elimination of the foreign content rule may have had an impact on foreign investment intentions with 21 per cent of Canadians saying they are more likely to investment outside of Canada, while 36 per cent of respondents say their foreign investments will stay about the same.
The Decima data were gathered between October 20th and October 30th, 2006, through Decima eVox, the company's large national online panel. Results are based on a sample of 2,170 Canadians, and the corresponding margin of error is 2.2%, 19 times out of 20.
Investors Group, founded in 1926, is a national leader in delivering personalized financial solutions to Canadians through a network of over 3800 Consultants located throughout Canada. In addition to an exclusive family of mutual funds and other investment vehicles, Investors Group offers a wide range of insurance, securities, mortgage and banking services. Investors Group is a member of the IGM Financial Inc. (TSX: IGM) group of companies. IGM Financial is one of Canada's premier financial services companies with over $113 billion in total assets under management.
| For more information contact: | ||
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| Ron Arnst Media Relations (204) 956-3364 ron.arnst@investorsgroup.com |
Laura Vallis Environics Communications (416) 969-2781 lvallis@environicspr.com |
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