SALES ABOVE THE ASKING PRICE ARE INCREASING12 Jul 2019
In a previous Word From the Economist, the Quebec Federation of Real Estate Boards (QFREB) presented a portrait of overbidding in Quebec. About a year later, it has provided an update.
Quebec's residential real estate market is more dynamic than ever. Over the last twelve months (from April 2018 to March 2019), the number of resales has increased by 6 per cent, while the supply of properties (active listings of properties for sale) has decreased by 9 per cent.
These conditions create a situation of scarcity that puts upward pressure on prices, particularly in areas that are in a seller's market. It is often necessary for buyers in these areas to offer a price above the asking price, and buyers can sometimes even become involved in bidding wars.
As we see in the graph below, most of the province's CMAs registered an increase in sales above the asking price compared to last year. Like last year, it is in the areas where the number of months of inventory is lowest that the phenomenon is most prevalent, namely in Montreal and Gatineau. In fact, in the Montreal CMA, 14 per cent of properties sold for more than the asking price. In the Gatineau area, 9 per cent of properties sold for more than the asking price.
Trois-Rivières was the only CMA that registered a decrease in sales above the asking price. However, given that there were fewer than ten transactions concluded above the asking price between April 2018 and March 2019 in both Trois-Rivières and Saguenay, it took a variation of only a few transactions to affect the overall proportion of sales above the asking price. So we should not consider there to be a robust trend underway in these two areas.
How much above the asking price?
For properties that sold above the asking price in the Sherbrooke CMA, buyers paid 5 per cent more than the asking price, which is equivalent to an additional $20,807. The next two regions in terms of the largest price differences are Quebec City and Montreal. Quebec City has a higher percentage price difference, while Montreal has a higher dollar price difference.
In Quebec City, buyers paid 4.3 per cent more than the asking price, or $13,647, while in Montreal, buyers needed to pay 3.8 per cent more, or $18,071. In last place, the Gatineau CMA posted a fairly stable percentage difference compared to last year. However, this represents a larger dollar amount, as property prices have increased over the past year.