Today's housing market, characterized by solid demand, steady consumer confidence levels and low interest rates, has put upward pressure on prices in Toronto. The average price has appreciated just at a rate of XXX % over the past five years.
Average prices, however, can be deceiving. For example, assume you bought your house two years ago and want to determine what it is worth today. Simply applying the average price statistic to your home may be quite inaccurate. Here's why.
Average price statistics are generally calculated covering a large district or, indeed, an entire city. It is not unusual for buyer activity to be heavier in lower-priced homes at certain points during an economic cycle or at certain times in the life cycle of a neighbourhood. It is also common that activity can be heavier in higher price ranges for the same reasons. National and world events historically impact activity in higher or lower price brackets to a greater or lesser degree. In the three months following September 11, high-end sales slowed dramatically, while first and second-time buyers continued to be very active in the market.
As the weight of buyer activity swings back and forth from lower price ranges to higher, average price calculations will be skewed. When either happens, average price is less a measure of house price appreciation and more a measure of price range activity. In other words, a substantial number of sales in the lower end will serve to lower the average price while a preponderance of high-end sales artificially inflates it.
For the most part, it's fair to say that price appreciation differs dramatically from neighbourhood to neighbourhood. In the past year, for instance, hot pockets and enclaves in central Toronto have increased more significantly than other areas.
Fair market value is "the price which a property would bring in a competitive and open market under conditions requisite to a fair sale, particularly that the buyer and seller are both prudent and knowledgeable".
The market value of a home is based on the following:
CURRENT MARKET CONDITIONS are the primary reason for fluctuation in home value. Your home's value is dependent upon a number of economic conditions including factors such as interest rates, supply and demand, vacancy rates, consumer confidence, etc.
LOCATION is significant in determining value. Presently, older, established communities situated within central core are in strong demand. As a result, there ahs been considerable upward pressure on pricing. Typically, prices depend on the home's proximity to the downtown core, convenient amenities, as well as schools and parks.
CONDITION OF THE HOME, in terms of general maintenance and state of repair (or disrepair) coupled with whether or not is has been renovated, will determine if the home is worth more, less or equal to a comparable home within the same area.
COMPETING PROPERTIES FOR SALE in your neighbourhood will also help determine the worth of your home. Homes of similar size, with a similar number of bedrooms, features, updates, and property dimensions would influence the value of the subject property. It is recommended that at least three competing or comparable properties be examined in order to ascertain an accurate value.
STUDYING RECENT SALES in your area will reveal what buyers have been paying for comparable homes in the same neighbourhood. In general, a home is worth what the market will bear and actual sales are a good indication of that.
It is very important to remember that all of these factors weighed together will determine fair market value. While you cannot control some of the variables, you can help protect the value of your home by keeping it well maintained. In a city like Toronto, where renovations are on the rise, that can matter a great deal when it comes time to sell. Home where attention has been paid to detail generally sell better and command higher market value.
At Martin & Meredith, our qualified sales representatives can help analyze trends in your area and make an accurate determination of your home's value. For general inquiries or to make an appointment, call our office at 416-88-000 or email us at firstname.lastname@example.org.