Canada is increasingly a nation of homeowners, and though a slowdown in sales is likely in the next few years, the long-term trend of rising real estate investing is likely to continue, a new report says.

The Scotia Economics report notes that the percentage of Canadian households who own their home rose to 68.4% in 2006, up from 65.8% in 2001 and 63.6% in 1996.

“The rate of homeownership likely edged up further in 2007 before levelling off last year, as the longest housing boom of the post-war era came to an abrupt, but inevitable, end,” says report author Adrienne Warren, senior economist and real estate market specialist at Scotia Economics.

The rising rates partially reflect the aging population, as baby boomers have entered their peak home-owning years, according to the report. But it also finds that a greater number of younger Canadians are making the transition from renting to buying, thanks to strong job and income growth, low mortgage rates, and mortgage innovation.

Also on the rise is the percentage of Canadians who own a second home, such as a cottage or vacation home. In 2005, 9% of Canadian households owned a second home, up from 7% in 1999, according to data from Statistics Canada and the Canada Mortgage and Housing Corporation.

This demand could slow in the decade ahead as baby boomers continue to age and as wealth gains retreat from their high levels of the past decade.

But Warren expects that the trend of more Canadians building wealth through real estate holdings could continue. Real estate assets accounted for the largest component of total household assets in 2005, at 42%, up from 38% in 1999. Scotia Economics estimates that this share is closer to 45% today.

The report notes that real estate holdings outpaced growth in the value of all other major household asset classes from 1999 to 2005, including private pensions, non-pension financial assets, business equity, and other real assets.

A hefty 16% of households own real estate other than a principal residence, such as a second home, rental properties, commercial properties, or timeshares.

“Notwithstanding the potential for a cyclical slowdown in home sales and price appreciation over the next few years, the longer-term trend toward real estate investing will likely remain an important component of household wealth accumulation and portfolio diversification,” says the report.

The report comes in the same week as the 2009 Royal LePage Recreational Property Report, which offers similar findings on the growing popularity of real estate investments.

The nation-wide survey found that 64% of Canadians consider cottage ownership a sound investment. More than half of respondents said they would be willing to make compromises with regards to their financial or lifestyle choices in order to own a cottage or recreational property.

“Our research demonstrates Canadians see recreational property as a smart and safe long-term investment,” said Phil Soper, president and CEO of Royal LePage Real Estate Services.

The report found that following a drop in sales in the second half of 2008, affordability has improved and the recreational market is now showing signs
of renewed interest and increased activity.