The Resilient Local Real Estate Market - Issue 368

The local real estate market has long been the subject of intrigue and fascination due to its stubbornly high prices that just won’t seem to come down. Despite expectations of a downturn or price correction, the market has remained surprisingly resilient. Here are some of the key factors that are contributing to the steadfast & resilient nature of the local real estate market in Guelph - and can maybe help answer the question of why these prices are being so stubborn.

High Sell-Through Rate

Guelph boasts an impressive average sell-through rate of 87.9%, indicating that properties are selling quickly! This rapid turnover prevents inventory levels from building up to the point where they could potentially stimulate price reductions. The high demand for housing in Guelph, coupled with limited supply, creates a competitive market that drives prices upward. When demand is high, there is no real reason for prices to come down. Even if you decided to list your house at a lower price, this would potentially stimulate competition - still causing the price to jump.

Committed Buyers and Interest Rates

Even with interest rate increases, committed buyers in the Guelph market remain largely unaffected. Guelph has a diverse and robust economy, offering stable employment opportunities that enable buyers to confidently invest in real estate. Many buyers in Guelph prioritize homeownership and consider it a sound long-term investment. The belief in the market's stability outweighs any concerns about interest rate fluctuations, thereby maintaining strong buyer demand even amid the increased interest rates.

Motivations of Investors

Investors play a significant role in shaping the local real estate market, and thus also contribute to the stubbornly high prices. In Guelph, investors have not been motivated to sell their properties. The steady appreciation of property values in Guelph makes it an attractive long-term investment option. Investors anticipate further growth and are inclined to retain their assets and continue to let their investments increase in value. This value is further increased by the rental demand which remains high due to Guelph's thriving student population and growing job market. This consistent demand provides investors with steady rental income, further discouraging them from selling.

Homeowners' Motivations

Despite the current high selling prices, homeowners in Guelph have not been motivated to sell. Many homeowners have benefited from the consistent price appreciation over the years, resulting in substantial equity gains. They see their homes as valuable assets that provide long-term financial security.

On the other hand, the lack of downsizing opportunities significantly contributes to homeowners in Guelph staying in their existing homes. This phenomenon is part of a broader issue within the housing market, where the entire supply chain struggles to keep up with the growing demand for housing in Southern Ontario.

The scarcity of smaller homes, condos, or retirement communities that meet the needs of downsizers exacerbates the problem. Without viable alternatives, homeowners are less inclined to sell their current properties, leading to reduced inventory and further intensifying the supply-demand imbalance in the market.

Understanding these factors such as high sell-through rate, committed buyers, investors’ motivations, as well as a reluctance to sell all reveal the reason why high prices in the Guelph real estate market persist. As long as the demand remains strong, supply is limited, and key market participants remain motivated to hold onto their properties, the local market is likely to continue its upward climb, providing an intriguing landscape for both buyers and sellers in the years to come.

Addressing these challenges requires efforts to increase the supply of housing options, particularly those suitable for downsizers. This could involve encouraging the development of smaller homes, condos, and retirement communities that cater to the needs of homeowners looking to downsize, rather than gearing sales towards investors to make financing of projects easier.

By creating a more balanced market with increased inventory, homeowners may feel more motivated to sell, easing the pressure on prices and providing opportunities for both buyers and sellers. This could be one of those situations where a government entity like Canada Mortgage and Housing Corporation (CMHC) could step in and follow its mandate to help create affordable and suitable housing for people. It’s been done before, time to look at doing it again.

With this heavy list of factors contributing to stubbornly high prices, this market can be hard to navigate. If you are an investor, looking to downsize, or even just trying to get into the market, it can be tough to decide what is the best move and where to find the properties you are looking for. If you’re looking for guidance, reach out to someone on our team - we keep up with all the local market trends so that we can be fully equipped to help you make the hard decisions.

On a different note…

We have been keeping you updated on the Real Estate market in Guelph & surrounding areas for just over 7 years! To recognize that, we’re celebrated the summer of ‘23 with a Traeger Smoker giveaway! After all, what’s summer without a BBQ?

Follow the QR code below or click here to enter the draw: