The real estate market is always volatile. You never know when it will go on an upswing or when it will go down. But that is what makes the market more interesting. Sometimes uncertainties compel people to make some impulsive decisions, which may help you get a buyer for your property even when the market is at its peak, and the prices are high.
Similarly, there is also a chance that the market will remain low for a prolonged period, which will lead to a reduction in your property’s value.
Here we are to make you aware of different reasons which can cause this reduction.
1. Interest rates
Many people buy houses using borrowed funds. So, the interest rates on those loans affect the purchasing power of the people to a great extent.
With a sudden rapid increase in the interest rates, the payments of interest on the funds have also increased. This has badly hit the real estate market, as people are not much willing to buy any property.
2. Inflation rates
To overcome the situation of inflation, the central bank often raises interest rates. And as we all know that a whole circle of inflation stays for quite a long time, so due to the high price, people may refrain from purchasing any property.
However, some homeowners consider this as a long-term inflation hedge.
3. Suppression of demands
As the interest rates are high for a long time, many house hunters were suppressing their demands, including the new immigrants looking for housing.
However, if the market conditions improve and their income level rises, all these pent-up demands will come out even if they remain high.
Many parts of Canada, including Vancouver and Toronto, have already seen strong housing demands amidst the ever-rising pricing situation.
4. Construction rates
This factor can affect your house’s value in two ways.
Either, the rise in demands for housing, as it seems the market will experience shortly, will adversely affect the value of your property if the construction companies can keep up with the rising demands. Hence, if the supply becomes higher than the demands, naturally, your pre-owned property’s price will fall.
It may also happen that with the fear of the rising prices, the construction companies can minimize their construction rates. Then you will have a great scope to demand high pricing for your property when all the pent-up demands for housing will burst out, and there will not be enough supply in the market.
5. Deteriorating economic health
If the economy shows a downward curve, then many potential house buyers will back down.
If the situation comes that short term interest rates are more profitable than long term interest rates, many investors will refrain from investing in real estate.
Currently, as Canada’s economy is going through inflation, the government has taken up the policy of high rates of interest to reduce the impact of inflation.
However, when the economy recovers, with better jobs and higher levels of income, people will be able to handle the housing costs, and hence the demand will rise.
6. Local differences
Besides all the factors affecting the nation’s economy, housing prices, to some extent, depending on the regional factors. The prices of the houses vary from place to place. So, whether the property’s value will fall or not depends on the demand and supply of housing in that particular area.
These are some of the factors you may check, which can either take the value of your property up or down. Though you may not have much to do regarding the same, however knowledge for somethings can also be bliss.
MTL GROUP is a property management and financing company, operating in the Greater Montreal area in Quebec. Our professionals are just a phone call away to assist you with your property management and financing needs.