Canadians pin retirement dreams on not-so-safe houses

Thu Jan 10, 2013 3:33pm EST
 
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By Andrea Hopkins

TORONTO (Reuters) - A long bull run in Canadian house prices and painful memories of the 2009 financial crisis have convinced many Canadians that their retirement dreams are best left at their own doorsteps - a strategy that many financial planners consider risky.

Indeed, more Canadians than ever are relying on appreciation in the value of their homes to pay the bills in their golden years. It's a trend that worries advisers, especially as savings rates decline and more people say they are comfortable carrying debt into retirement.

As the U.S. housing crash so painfully demonstrated, property values can move in both directions - and quickly.

"It's the old adage -- don't put all your eggs in one basket," said Chris Buttigieg, senior manager of wealth planning at the BMO Retirement Institute BMO.TO.

Buttigieg says retirees may find it difficult to sell their home in a market that's softening or to find somewhere affordable to live after selling out. And it's just risky to assume a single illiquid asset will fund what may be 30 years of retirement.

Pointing to a 2012 study he authored, Buttigieg said 41 percent of Canadians now consider equity in their home an option to save for retirement and 47 percent said it is their biggest financial asset.

While advisers may question the strategy - which after all eats into their sales of investment alternatives - its popularity is easy to understand.

Urban housing has experienced a long boom in Canada, with prices doubling or tripling in recent decades even as stock market portfolios slumped in the 2009 crash.   Continued...