Even though the overall housing market slowed down in the second half of last year, condo prices remained strong and ended up increasing almost 20 per cent in 2017.
Condos make up the vast majority of new homes currently under construction, and prices are still affordable when compared to a single family home.For some, living in a condo is becoming a more desirable option, and for many others it is the only realistic way they can own a home in an expensive Toronto market. Here are some tips for buying a Toronto condo.
New build vs. resale
It used to be the case that purchasing a pre-construction condo would cost less than buying an existing condo in the same neighbourhood. This makes sense, as there should be a discount for letting your money sit with the developer for so long, as well as all the uncertainty surrounding new build timelines, and final layouts and finishes.
However, in the current market, pre-construction prices are matching and sometimes exceeding the prices of existing condos. This seems nonsensical as it is always a much better financial decision to own a unit that can be put to use, as opposed to owning a contract that has no use until the building is finished.
An existing condo can be lived in or rented out as soon as it is purchased, creating immediate financial benefit for the buyer. Since condo construction can often take four to five years or more, and an average one-bedroom condo now rents for more than $2,000 per month. This ends up being a significant amount of lost income. From a purely financial perspective, buying a resale condo is often a better option than buying a pre-construction condo.
Many condos built in the last decade have been part of a larger development that has multiple condo buildings sharing a common amenity space. This is great way for condo owners to enjoy the use of amenities while sharing the cost between a larger group of owners, making it much cheaper.
Every condo amenity and common area is an expense. A common example is a swimming pool, which typically adds approximately $50 per monthto an owner's maintenance fees. Sharing the cost of the swimming pool and other amenities with multiple condo buildings can be a smart investment as the cost is lowered when divided among more owners. A bonus is these large amenity spaces tend to be more frequently used and therefore better maintained than amenity spaces in smaller buildings.
If you're looking to maximize the amount of space for your budget, then an older building is definitely the best choice. Even buildings as young as 10 years old have significantly larger floor plans than brand new buildings, and the price per square foot is lower. A drawback would be that the finishes can seem dated, but fortunately this can be changed.
A condo renovation can be a great investment as it is very cost-effective compared to renovating a house. There is no structural work, and typically no major plumbing or electrical work required. For the most part, the biggest cost is the finishing materials like flooring and tile, and appliances. It's very easy to renovate an older condo into a gorgeous modern space at a very reasonable price, and in the end, this option can be less costly than buying in a newer building.
One of the smartest changes I've seen people make is to convert a large den into an extra bedroom. This is one of the easiest ways to increase the value of a condo, as installing a wall and a door is a very inexpensive renovation.
I had a client who listed their unit as a three bedroom, and they were able to sell for $50,000 more than the exact same unit, listed at the same time, selling as a two bedroom plus den.
More families than ever are living in condos since they are priced out of the market for detached homes. For investors, the ability to rent out an extra bedroom makes sense as more tenants are sharing condos due to the increase in rental prices. When buying a condo, consider focusing on units with dens that are large and could be used as bedrooms, as it may represent an opportunity to quickly and inexpensively add to the value of the unit.
While it is a common theme to complain about the huge amount of new condos being built in Toronto, we should instead embrace our increasingly vertical city. As condo ownership becomes more common, buyers will become more savvy about what makes a unit or a building stand out. The advice above will help to make sure you make a smart decision when buying a condo in Toronto.
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