There are many factors that influence the price of real estate. Whether you are a buyer or seller, you need to understand what factors are present that are impacting on the market, so you can make the right decisions at the right time and in the right location. Many of these factors are interconnected.
- There is a direct connection between interest rates and prices. The higher the rates, the lower the prices; the lower the rates, the higher the prices; even so, there will be more people being able to afford to buy their first home. This puts pressure or greater demand on the market.
- If there are high vacancy levels, this could reduce investor confidence due to the potential risk, and real estate levels, this could stimulate investor activity as well as first-time homebuyers. Renters who canít find a place to rent may borrow from relatives or find other creative ways to enable them to purchase a
- Confidence in the economy is important to stimulate homebuyer and investor activity. If the economy is buoyant and the mood is positive, more market activity will occur, generally resulting in price increases. At the same time, however, strong economic growth can also be associated with an increase in interest rates. Conversely, if the economy is stagnant, the opposite dynamic occurs resulting in a decrease in activity and lower prices. If real estate buyers are concerned about the same problem, a predictable loss of confidence occurs in the market.
- A geographic location with attractive business, employment, tourism, and retirement opportunities, will attract people from other areas. The increased demand will increase prices. Conversely, if there is net migration out of the area the opposite effect will occur, i.e. real estate prices will be forced down.
- This is an important factor. Highly desirable locations will generally go up in price more quickly and consistently.
- The perception by the public of a certain geographic location or type of residential property or builder will affect demand and price. Some areas or types of properties are "hot" and some are not at any given time.
- The policy of a provincial or municipal government in terms of supporting real estate development will naturally have a positive or negative effect on supply and demand and therefore prices.