We hear the term “Average Sale Price” A LOT. People post about it on Facebook and tweet it on Twitter. We read about it in major media headlines, the average sale price in Canada is…the average sale price in Ottawa is… Well let me tell you that the average sale price does not matter when it comes to determining the value of real estate. It’s easiest to understand this when looking at the National average sale price. We live in a big, diverse country with very different real estate markets and odds are that the market in PEI is nowhere near the same as the market in Vancouver.
Next, the average sale price in Ottawa is equally misleading because we have about the same diversity in Ottawa as the country does when it comes to micro markets (that’s just a fancy way to say individual neighbourhood markets)! For example, if you don’t live in Rockcliffe, the area that has the most $1 million dollar + homes, then you don’t want to be using that data. The same goes for the difference in a single family home that sells in Kanata versus a single family home that sells in the Glebe.
Now, let’s break it down even more! Take an area like West Centretown & Centretown (North of the Queensway in between the O-train and Elgin Street). If we were to look at the average sale price of a townhome, it would be including new infill developments that are open, modern, brand new and selling anywhere around $650,000 with older townhomes from the early 1900’s that are smaller and may require updating some of which have recently sold for around $345,000.
Finally, let’s look at the math, I decided to calculate the average sale price of condos in the Ottawa West districts for 2014. There were 28 sales and the average sale price worked out to $334,889. I noticed only one of those sales was almost double the average, so I removed that one single sale and the average dropped to $321,440. That one sale bumped the average sale price up by more than $13,000!
Luckily there is an alternative to average sale price. CREA has developed the MLS®HPI (Home Price Index). It covers 11 major housing markets and luckily Ottawa is one of them! The HPI tracks price levels at a point in time relative to price levels in a base (reference) period for different housing types. This model is used to calculate Benchmark Prices. A “Benchmark home” is one whose attributes are typical of homes traded in the area where it is located. Representatives from Statistics Canada, Canada Mortgage and Housing Corporation & The Bank of Canada have reviewed and endorsed the MLS® HPI methodology.
If you’re interested in more information on sales & statistics in your neighbourhood, please feel free to call or e-mail me and I can send you relevant information.