Real Estate Talk: Pricing
to sell in today’s market

Raising interest rates and lowering property values have caused a reduction in both buyers and sellers

By Joseph Marovitch

Updated March 7, 2023

We are in a difficult market with high-interest rates and inflation. We all are aware of this. The bank of Canada has aggressively raised interest rates eight times in the past year to bring down the inflation rate. This effort has had a significant effect on the real estate market by reducing property values. Raising interest rates and lowering property values have caused a reduction in both buyers and sellers.

Most buyers are waiting for interest rates and inflation to drop, so their carrying costs (expenses to maintain a property) will be less. Some buyers believe property values will decrease further with future rate hikes in 2024 and will therefore get to pay even less for a property.

The bank of Canada has aggressively raised interest rates eight times in the past year to bring down the inflation rate. This effort has had a significant effect on the real estate market by reducing property values.

Most sellers are waiting for interest rates to drop so their property’s value will rise.

Then there are those buyers and sellers who must act now due to having to relocate, requiring more room or less, financial circumstances, and a myriad of other reasons. Therefore, if one must sell now, property pricing is of paramount importance.

Supply and demand dictate prices, and we read the market by examining active listings and comparable sales over the past six to twelve months. Pricing property consists of the following:

1. Examine all the comparable sold property in a six-month to a one-year period for sold prices. This tells the story of how much properties comparable to your property sold for. This is the reality factor.
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2. Examine all the comparable property to the seller’s property that are for sale. This indicates what the seller’s property is competing with. If the seller has the same municipal evaluation but more or less land, more or fewer bedrooms or bathrooms, and more or fewer upgrades, this affects the seller’s price. Buyers want the most and best house for their money.
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3. After examining all the factors and more, the property is placed on a scale from lowest to highest possible asking price and selling price.
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4. The final factors affecting where the property will be placed on the scale are the condition of the property and how fast the seller wants to sell. If the property is in excellent and upgraded condition, it can be placed on the higher end of the scale. If the property is in poor condition and requires renovation, it should be placed on the lower end of the scale.
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   If the seller wishes to sell quicker, then the property can be placed at the lower end of the scale. If there is no rush, placing the property on the higher end of the scale can be acceptable.

‘It is always good to use a strategy and place the property on the scale in an advantageous way.’

However, other factors come into play when the property is placed on the higher end of the scale. It is always good to use a strategy and place the property on the scale in an advantageous way. Pricing a property slightly lower than its value can generate more interest and better offers, and we want as many buyers as possible to get the best price and terms.

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State of the market

CPI today (inflation rate) 5.9%
Bank of Canada Interest Rate 4.5%

There is some good news for buyers and sellers, at least until 2024. The Bank of Canada has decided to not increase the interest rate, currently at 4.5%, until 2024 since the rate hikes have driven household debt higher than can be managed, not to mention the unstable and declining real estate market values.

The forecast is that the inflation rate may reduce to 3% by mid-year, as economic indicators show, with a further target reduction of 2.5%.

There is some good news for buyers and sellers… The Bank of Canada has decided to not increase the interest rate, currently at 4.5%, until 2024…

If this is the case, we may not see further interest rate hikes in 2024. If this is not the case and the inflation rate rises, then we most likely will see future rate hikes and possibly a recession.

This situation places buyers and sellers who are speculating in the real estate market in a holding pattern until January 2024.

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