Which market forces dictate the price of real estate? What makes a property cost as much as it does, and why? 

The five main factors that influence home prices are location, supply and demand, the economy, interest rates, and government policies. Let’s take a closer look.

Let’s start with location. A property’s proximity to amenities like schools, shopping, and public transportation can increase its value. Additionally, properties located in desirable neighborhoods with low crime, good schools, and attractive scenery often fetch higher prices as well.

Next, supply and demand is a universal truth no matter what type of market you’re looking at. If there’s high demand for housing in a particular area with limited supply, prices will go up. On the other hand, if there is an oversupply of properties in a certain neighbourhood with low demand, prices will drop.

The overall state of the economy also affects real estate prices. When the economy is doing well, people have more money to spend on housing, which can drive prices up (this ties into the concept of demand from our previous point). However, during a recession or economic downturn, real estate prices can drop as people become more conservative with their spending and financial outlook.

Interest rates also influence real estate prices. When interest rates are low, it becomes easier for people to borrow money for mortgages and buy homes, which can drive up demand and prices. High interest rates, on the other hand, can deter buyers, which leads to lower prices.

Finally, government policies influence the real estate market. Policies that incentivize homebuyers or restrict the supply of properties can drive up prices, while policies that increase supply, or make it more difficult for people to buy homes, can lead to lower prices.

Keeping an eye on these factors will help you make informed decisions about when to buy or sell property. Have questions about what market conditions look like right now? We always have our finger on the pulse of Montreal’s real estate scene! Get in touch and we’ll be right back at you with an answer.