Real estate is a unique asset for all kinds of reasons, including value appreciation.
Let’s say you buy a brand new car right off the lot. In 10 years or so, there’s a good chance that it will be worth less in terms of market value compared to when you first bought it. The same concept applies to a wide range of other everyday purchases.
At a glance, this is a fairly intuitive idea: Something new is worth more than something older. But there are some pretty significant exceptions, like real estate.
In Canada, real estate tends to appreciate over time. The longer you own your house, the more valuable it (usually) becomes. However, that doesn’t necessarily mean that a property’s worth is defined solely by its age.
If you’re about to approach the market either as a buyer or seller, it’s a good idea to understand how property values work. And that’s exactly what we’ll explore in this blog post.
Thinking about buying a house? Explore our featured listings.
Why Does Real Estate Appreciate In Value?
If other products tend to lose their value over time, what makes real estate so special? There are a few different factors behind this, but one of the biggest is demand.
Housing is a basic human need, and as Canada’s population grows, so does the demand for housing. Heightened regional demand can also accelerate property value. Cities like Toronto, Vancouver, and Calgary are great examples of this, where the average cost of a house has climbed sharply over the past decade. Although smaller markets have seen property values grow, it’s not to the same extent.
Real estate also provides a natural hedge against inflation. When the cost of materials and construction go up, so does the final cost of a new or rebuilt home. This can elevate the value of older resale homes in the same area.
How is Property Value Calculated?
No house, new or old, has an objective monetary value. In the same vein, property values don’t climb at a consistent, predetermined rate. Instead, a home’s potential worth is determined by active buyers and a range of external market conditions (like demand).
In real estate, determining the potential value of a specific property requires professional expertise.
Let’s say you’re looking to sell your house. Before listing, your real estate agent will perform a property evaluation. This starts with an in depth analysis of your home and its features. From there, your agent compares it to available and recently sold properties nearby. These insights are further complemented by the agent’s personal experience, supplementary data, and other resources. By the end of the evaluation, they’ll present you with an estimate of your home’s approximate market value.
The same tactics apply to buying a house. When you find a for-sale home that you’re interested in, your real estate agent will do their due diligence to ensure it’s priced accurately.
On the hunt for more home buying advice? Read these blog posts next!
- What Conditions Should You Include in Your Buying Offer?
- Can You Buy a Home Without an Agent?
- Is it Time to Stop Renting and Buy Your First Home?
Old Homes vs Building a Home
While every property is different, many older homes in Ontario boast exceptional market value. But how do these historic resale homes compare to building a brand new home?
Comparing the costs of an older house versus a new pre construction home isn’t black and white. In terms of sticker price, resale homes generally cost less than brand new builds. However, older homes may require costly renovations or repairs over time. This can add up and narrow the gap in terms of overall cost.
If you’re not sure what type of property will suit your needs best, talk to a local real estate agent.
Love historic homes? Learn more about the implications of buying a house in a Heritage Conservation District.
Don’t Skip the Evaluation
Just because a house is decades old, it doesn’t necessarily mean that it’s in rough shape. Depending on their history and previous owners, well-kept older properties can be just as move-in-ready as new builds. That said, you don’t want to skip the home inspection.
No matter how new or old a house is, there could be issues hiding beneath the surface. Having the property professionally inspected before you buy protects you from costly repairs or other problems down the road.
If you’re selling an older house and aren’t sure of its overall condition, obtaining a pre-listing home inspection can be a good idea. This ensures you have the opportunity to address any major issues before they have the opportunity to jeopardize your sale.
Looking to Buy or Sell?
If you’re thinking about buying or selling a home, work with us, Bosley Real Estate. Serving Canadians since the 1920s, our multigenerational team has perfected the real estate process, all while raising the bar for client support and satisfaction.
Making real estate moves? We can help! Send us an email at info@bosleyrealestate.com or call 416-322-8000.
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