Market value, emotional value and use value: in this frantic race that has become access to property, both buyers and sellers are scratching their heads when attaching a label to a property. Faced with the frenzy of multiple offers, many are betting very high — and could face a market correction — while others are trying to limit their potential debt, at the risk of losing repeatedly. How to decide?
Real estate brokers normally look to comparables, i.e. similar properties sold in the same neighborhood. “But each property is unique,” explains Martin Desfossés, real estate coach at DuProprio. This is why he then determines what sets it apart: its location, the type of property (condominium, bungalow, two-storey house), its size, its finish, its condition, etc. “These are all characteristics that will affect market value,” he adds.
This technique allows sellers to have the right time, according to him. Yet, with the current overheating, crushes lead to offers that may seem unreasonable.
Subjective value
“We all need housing, but we also have desires: to live in a beautiful place, to have large rooms, parking… That’s why we see sales being concluded at amounts well beyond the prices displayed. It is the value that the person subjectively attributes to this property. »
Faced with the tendency of brokers to post lower prices to stimulate the interest of potential buyers, many find themselves in the dark about the true value of the product. This is why Mathieu Lagarde, president at Christine Gauthier Immobilier, suggests that we base ourselves on the municipal assessment. Not to stick to it (as a rule, cities assess well below market value), but rather as a reference, since this indicator is according to him more reliable than a price determined arbitrarily by a broker.
“When I have to assess the value of a house, I look at the average difference between the municipal assessment and the selling prices of its neighborhood and I calculate this same proportion for the property,” he explains.
In Quebec, residential properties were sold an average of 47% above the municipal assessment, according to an analysis of the To have to of some 135,000 transactions carried out between January and March 2022 and compiled by Centris. To find out about this gap in your municipality, consult our table below.
The broker also concludes, after analysis, that the properties that sell at higher prices are generally listed “much lower” than their comparables in relation to the municipal assessment. “These homes are often listed 10% lower than the neighborhood average, so mathematically they are put on the market for less than their true value. The buyer’s compass would therefore be quite reliable.
A fallible approach
These calculations are questioned by Hélène Bélanger, professor in the Department of Urban and Tourism Studies at UQAM. “I know it’s utopian, to set a price, we should rather focus on the ability of households to pay and their needs, believes the professor. It’s a bit like the vision behind social housing, the price of which is set at 25% of income. »
Faced with the prevailing discourse of supply and demand, she replies that this approach has weaknesses. “It implies that the market balances itself, but it puts aside the lifestyles, expectations and aspirations of individuals. It should be the use value that matters, that linked to our attachment, our identity and our appropriation of places, and not the market value. »
This economic vision also has serious consequences on access to property, according to her. It allows big investors to acquire rental housing and gentrify prominent neighborhoods, and ensures that young households must remain tenants.
“The middle class has less and less means to buy, there is really a growing inequality, says Hélène Bélanger. Young adults who earn a good living can no longer buy their parents’ “bungalow”, for example. We therefore have a whole generation that will not be able to access property if it does not have a family helper. »
Result: the flips have become commonplace for those who hold the capital, while on the other side of the spectrum, ie low-income households, we must move away from the centers, which have become unaffordable. “There have always been speculators. But given that there is little government intervention in the rental market, housing has become a market good and the speculative appreciation of these investments is disproportionate. »