We Torontonians love talking about real estate. And lately, a lot of our discussions have centered around the city’s sizzling hot condo market.
If you’re a condo owner, all this talk may have you thinking: how can you best capitalize on your investment? Should you hold on to your unit, or should you sell it? And with the recent drop we’ve seen in detached housing prices, is it finally time to take the plunge and buy your own house?
Here, we’ll take a look at how the market has changed in the last year — and the decision that many condo owners are grappling with.
Oh, how the market has changed
Until April of last year, detached houses were the hottest commodities in Toronto’s real estate market.
Now, the effects of the Fair Housing Plan are settling, and we’re seeing how the numbers have shifted since peak-2018.
This January, the average detached home sold for 4% less than the year before. Last month, the drop had evened out to just 1.5% less.
It seems that house prices are creeping back up. But they’re still at some of the lowest levels we’ve seen in years. Looking at condos, the opposite has happened.
Prior to the Fair Housing Plan, condos appreciated at a steady rate. After detached home prices took a tumble, condo prices stayed almost rock-steady.
Fast-forward to now: asking prices for condos soared 35% this year. The demand for both resale and pre-construction condos is strong. And we’re seeing more interest, more offers, and providing more showings for condos than ever.
Why are condos so valuable?
There are a few reasons why condo prices have stayed steadier than their detached counterparts.
First: the increase in average home price has left Torontonians with reduced budgets (between $400,000 and $700,000), which means condos are their only real option for buying. It’s been nearly impossible to find a move-in ready house at an affordable price in the last few years. Condos make up 90% of the affordable sector, especially in the downtown core.
Second is the tight rental market. A soaring population means a growing need for more housing. At the end of 2017, the rental vacancy rate was at a 16-year low of 1.1%. Which means that, at any given time, only one rental unit out of a hundred is unoccupied.
Low vacancy results in a few things: first, rental prices increase rapidly. Then, renters who are unhappy with their increased housing costs start looking to see if they could be paying a mortgage for the same price as their monthly rent. Investor-landlords, too, find that low vacancy is beneficial to them. It reduces the chances that they won’t find a tenant (and tenants guarantee a steady stream of passive income).
Landlords can also charge more in rent than what they might be paying in monthly costs (mortgage, maintenance fees, taxes), which nets them a little bit of extra spending money on top of their tenant-paid equity. So we have high competition from investors, renters, and mid-range buyers who are all looking to buy in the most affordable housing sector—condos.
Swapping your condo for a house: smart investment?
So, should you sell your condo and invest in a house? The answer is, of course, that it depends.
Have you always dreamed of owning your own house in the GTA? If so, this is a great time to buy one. Condos are selling for top dollar, and those dollars go further in the detached housing market than they would have a year ago.
But if you love your condo and the neighbourhood you’re in now, you may want to stay put. We can never fully predict what might happen to housing prices, so loving where you live should be your top priority.
Either way, GTA real estate is a good investment. Our advice is to talk to an industry professional who can help you make smart investment decisions.
Want some expert advice on investing in a home or condo? We’d love to advise you. Let’s talk about!
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