Definition
Real estate appreciation is the growth in a property's value over time. It is one of the main drivers of wealth creation for Canadian homeowners.
Appreciation factors: - **Demographic**: population growth, immigration, household formation - **Economic**: local employment, income, low interest rates - **Supply**: geographic constraints (water, mountains), restrictive zoning, construction costs - **Local**: new public transit, neighbourhood revitalization, new institutions
Canada historical (CMHC): - 1980-2023: average annual appreciation of approximately 5-7% in major cities - But: high volatility (Toronto -15% in 1989-1996, +100% in 2016-2022)
Appreciation vs. inflation: for a property to truly be an investment, its appreciation must exceed inflation (CPI) + holding costs (interest, taxes, maintenance). Historically, residential real estate in major Canadian cities has outpaced inflation long-term.
Risk: past appreciation does not guarantee future appreciation.