There are several questions we get asked on a daily basis. However, one of the most common we get from both buyers and sellers is what affects the price of their property?
There is no simple answer and there is a wide range of factors that can have an impact on the price of a property. It’s important to be aware of everything, but in many cases, these factors are out of our control.
We spoke to our Realtors and asked them to discuss theses uncontrollable factors:
The economy as a whole has a massive impact on real estate, from income growth and a consumers’ ability to affordable prices, to mortgage financing and real estate related jobs such as construction.
During a recession properties will see significant depreciation as both financing and spending power decrease, meaning that higher prices are no longer supported. Conversely, during more affluent periods when income growth is above average, spending will also increase as purchasing a property is far easier.
The buyers’ ability to hold up property prices depends on a range of factors such as GDP, income growth, manufacturing activity and unemployment.
As interest rates increase so do mortgage rates, which in turn lowers the demand and price of real estate. This is also tied to the economy as a whole and is completely out of the control of sellers.
During periods of high interest rates, you can expect properties to be on the market for longer and seller’s will typically have to adjust their prices accordingly to meet the demands of the market.
In all markets, there are investors who purchase properties to either renovate and sell for profit or put up for rent. During different economic periods, investors can have an effect on the market.
During the housing crisis, which saw massive reductions in price of properties and an increase in distressed properties, investors would purchase more. However, when the number of these properties decreases, investors will most likely liquidate some of their properties. This, in turn, can lead to an increase in the number of properties on the market, reducing the price of properties in the area.
Location always has an impact on the price of a property and while you can control where you purchase a property, you can’t control what happens in that area.
Proximity to amenities, zoning restrictions, and infrastructure all affect the price of a home. It’s impossible to control what happens in your local area – in the future, there may be new roads, schools, or other desirable amenities that could potentially increase the value of your home.
Always speak to your Realtor about the future plans of an area to ensure that your home will maintain its value and not be affected by later developments.
A comparable is the name given to similar properties being sold in an area. These can also affect a home’s market value as appraisers and Realtors look at similar recent home sales in determining a potential price.
Foreclosures and short sales will complicate this as they will sell at lower prices, decreasing the neighbourhood’s average sales price.
There are many other macro factors that affect the price of real estate that will always be outside of the control of the seller, but it’s important to stay as informed as possible. If you’re looking to sell, don’t hesitate to contact one of our local agents.