Is Now a Good Time to Buy a Condo in Toronto?
Is Now a Good Time to Buy a Condo in Toronto?
Yes, buying a condo in Toronto is an excellent investment opportunity. As rising interest rates in 2022 have negatively impacted home affordability, many buyers have turned to condos because of their lower starting price point. This has caused demand for condos in Toronto to surge and prices are rising as a result. Condos are currently the hottest segment of the Toronto and GTA real estate markets with the average selling price in Q2 2022 up 12.2% versus a year prior.
Another factor that is expected to keep demand for Toronto condos high in the long term is higher than anticipated immigration. In 2021, the Government of Canada announced an immigration plan to accelerate the country’s post-covid recovery by welcoming 1.2 million new immigrants between 2021 to 2023. This number was increased yet again in November 2022 when the government announced an ambitious plan bring in 465,000 immigrants in 2023, 485,000 in 2024 and 500,000 in 2025. To put these numbers in context, the 405,000 newcomers that came to Canada in 2021 represented a record-setting number. Toronto is the most popular destination for new immigrants to Canada due to its cultural diversity and availability of jobs. All of these new residents will need a place to live, and many will turn to condos due to their price point and proximity to major transportation lines.
Is it smart to buy pre-construction?
Buying pre-construction is a wise investment because you are buying a property at today’s prices that appreciates in value by the time it is ready for occupancy. Purchasing a pre-con also gives buyers the advantage of more time to save their down payment because it is paid in progressive stages over the course of the project’s construction. This means you can lock in a property today’s prices even if you don’t have the entire down payment saved up yet.
We have a fantastic article here outlining all the reasons why buying pre-construction in Toronto is a fantastic option.
Do condos hold their value?
Yes, condos not only hold their value but will appreciate considerably over time. In fact, the assertion that condos do not appreciate at the same rate as single family homes is completely false. Historical price data from Toronto MLS shows a 231% increase in average condo price across Toronto and the GTA from 2012 to 2021. Check out this graph of Toronto and GTA historical average condo price growth:
What makes the value of a condo go up?
There are 3 primary factors that influence the long-term value potential of a condo building relative to its competitors:
Location: Location has the most influence in determining how much the value of a condo will increase over time. A condo located in a remote area will not perform as well as its centrally located counterpart. Many condo buyers are lifestyle-motivated, meaning that access to amenities, entertainment, activities and a variety of dining options are important to them. Immediate access to public transportation (particularly being located directly on a subway line or close to a train) is a huge plus because it not only allows residents an alternate way access their favourite places but the flexibility to do so without having to own a car.
Supply and Demand: As with any market, higher demand for condos relative to the available supply in a particular area will influence the price buyers are willing to pay. Condos located in city centers or close to public transit lines in places with solid job markets are generally always in demand. Condos located in very remote areas or cities that are not as highly demanded will appreciate in value less quickly. The same goes for areas where the supply of condos available exceed the demand.
Maintenance: Condos that have been routinely maintained will perform better over the long- term. Quality of maintenance is a direct function of having a responsible board of directors in place that schedule maintenance and repairs proactively before problems arise and set aside sufficient funds to perform these repairs. Well-kept buildings garner more appeal and are more desirable to live in. They also have the advantage of lower maintenance fees. Unforeseen mechanical or structural issues come at a big cost which is passed onto the homeowners in the form of special assessments and higher monthly fees.
Buying a pre-construction condo is another great way to realize gains in the value of your property. This is because when you buy pre-construction, there is a discount factored into the price that compensates buyers for having to wait 2-4 years for completion of the project. Put another way, buyers of re-sale homes pay a premium for not having to wait to move into their new home. Pre-construction buyers also benefit from market appreciation over the course of the project’s development, so their new home is often worth considerably more than they paid by the time it closes.
Are condos hard to resell?
A major benefit of condos is that they actually sell faster than single family homes. The lower entry price point of condos often means there a greater pool of qualified buyers for, particularly if the unit is located in a high-density urban area. Despite monthly maintenance fees, condos actually cost less to operate than single family homes, and many people are attracted to the maintenance-free lifestyle that comes with condo ownership. Buying a condo with easy access to public transportation is always an advantage that helps units sell even faster.
Which floor is best in a condo?
For resale, buying a condo unit on one of the middle floors is typically the best option. As some condo buyers prefer not to be on either the highest or lowest floors, buying in the middle of the building typically appeals to the largest demographic. Higher floors are typically more expensive because they offer the benefits of better views, less street noise, better security and more prestige, however not every condo buyer is willing to pay a premium for these advantages.
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