It’s a good time to buy a condo.
There, I said it.
Despite the near constant references in the media to an over supplied condo market in Toronto, I think now is actually a good time to buy a condo.
Well, the right condo.
Don’t worry, I’m not pitching any particular building or development.
When I say the right condo, I mean a condo that has the combination of right features and attributes that mean it is both enjoyable (to you or a tenant) to live in and easy to sell when you choose to do so.
Let’s break into down into 3 easy rules.
Rule 1 – The building is well situated
You can’t change where your building is located, nor are you likely to see major changes in the neighbourhood over the short term. This means we look for a well situated building, not facing a slaughterhouse, backing onto a major highway or sitting miles from any transit. New construction coming up that will block views or change the feel of the area also need to be taken into consideration. The neighbourhood should be a mix of residential and commercial ideally.
Rule 2 – The unit itself is well situated
In every condo building there is tremendous difference in sale prices that is due to where the unit is located. There is often one direction that the “best” units face and one direction that the “worst” units face. In addition, close proximity to certain building amenities or structural features (gym, garbage chute, parking garage entrance) can make an otherwise lovely unit difficult to sell. The ideal unit faces the best view in the building and is located close but not directly beside noisy or disruptive amenities or structural features.
Rule 3 – Common areas and amenities are easy to maintain
Maintenance fees can have a huge impact on the value of units in a condo building. With current mortgage rates, for every $100 worth of maintenance fees, buyers could pay for an additional $20,000 worth of mortgage. This means that a condo that lists at $380,000 with $500 maintenance fees could cost the same monthly as a $420,000 condo with $300 maintenance fees. Ideally, choose buildings that avoid expensive amenities that often require repairs, like hot tubs, pools and lavish party rooms. Common areas that are not well designed for high traffic volumes wear out much sooner, requiring costly renovations to avoid having the building look worn down. While individual condo buyers don’t get to dictate what amenities or common area design is in a building, by looking first at buildings that limit the amenities, we stand a better chance of avoiding skyrocketing maintenance fees.
I am amazed when I see units sell in buildings in bad locations, facing the worst possible way and with loads of luxury amenities that most tenants never use. I wouldn’t sleep at night if I was responsible for one of my clients buying a unit like that. I don’t think it is a stretch to say my clients choose to work with me because I hold myself responsible for them buying the right property – good to live in (or rent out) and able to be sold at a later date for a great profit.
If you think that the idea of buying a condo is crazy given the supply, I’d urge you to look around and see what some well known developers are saying. They are most definitely putting their money where their mouth is by building and financing new condo developments. Peter Freed of Freed Development, known as the King of King West, said recently “I still think Toronto is undervalued. You can still buy a well-located new condo in a great neighbourhood for $550 and $650 per sq. ft. I see in the next three to five years, the average condo costing $750 to $800 per sq. ft. in downtown Toronto in a good neighbourhood.”
In working with clients on the leasing as well as purchasing and sell sides, I see continued strength in the condo market. It remains hard for tenants to get a rental property and sales of condos continue to be steady. I am actively working with a number of buyers looking for condos, either for themselves or as investments and it is through this work that I developed the three rules.
If you or anyone you know are considering buying a condo, please contact me to discuss your options. I would love to be responsible for what comes next.