A lot of rumblings have been heard and read about the "GTA," and also stated in some articles with BS interpretations of market statistics that have educated individuals into questioning their Toronto condo investments. Those who have [rightfully] invested a significant amount of their life savings in Toronto real estate have undoubtedly experienced anxiety and even a little panic as a result of the media attention. As a result, it wouldn't be unusual if you've taken the misinformed advice regarding investing in Toronto real estate and are now treading carefully through the market as a precaution.
The cost of condos in Toronto has reached an all-time high and is continuing to rise.
When it comes to investing in real estate in Toronto, purchasing a condo makes the most financial sense from an economic standpoint. When looking at condo pricing in Downtown Toronto, we must consider local statistics, specifically the locations in which we will be purchasing a Toronto investment condo shortly. Our concerns about condos in Mississauga and Brampton are unfounded because include this information in the data will just skew the results. We want the most comparable statistics to be from the places in which we will be investing so that we can make the most informed decisions. Since this blog is about investing in real estate in Toronto, and specifically about purchasing a condo for investment purposes, we should have a look at the typical condo prices in downtown Toronto, specifically the municipalities of C01, C08, and E01.
Is Purchasing a Condo in Toronto a Smart Financial Decision?
Is it a good idea to put money into real estate in Toronto? Is it a smart idea to own a condo in Toronto, more specifically? Is buying a condo a wise investment? As you can see from the chart above, it was a resounding success for both my clients and myself. Despite what the news media has told you over the last year, all of my condo assets were not only retaining their value but were increasing in value significantly.
This is especially true when you consider that the historical average rate of appreciation for Toronto condos has been 4-5 per cent each year. Condo investment strategy differs from that of the ordinary investor purchasing a condo in Toronto for financial purposes — or that of the average realtor in the city.
Purchasing a condo in Toronto as an investment while rental prices are high is a difficult decision.
Despite the well-intentioned provisions of the Rent Control Act, Toronto has experienced an increase in rents due to the low vacancy rate and increased rental competition in recent years. The competition among renters is fierce, with some giving an extra month or two of rent in cash up ahead to get the apartment they wish. As an example, we'll look at 11 Charlotte Street, where two practically identical flats were rented in late August within TWO DAYS of one other, with the latter unit renting for $400/month more than the former.
The first unit is located at 11 Charlotte St. on the 34th floor, with parking and a locker included.
Second unit: 11 Charlotte St. – 28th floor, with parking but no locker; third unit: 11 Charlotte St. – 28th floor, with parking but no locker.
The current situation dictates that the apartment on a higher floor with a locker included should command a higher rental fee than the unit on a lower floor without a locker included. Nonetheless, with such a low vacancy rate and a glut of renters clamouring for a place to call home, landlords are likely to get what they ask forgiven of course that what they are asking is reasonable, which in this case was unquestionably the case.
To the surprise of no one, Toronto rental rates increased by 8.8 per cent in 2018, according to TREB MLS and their 2018 Q4 Toronto Rental Report. At the start of 2020, the average monthly rent for a one-bedroom condo in Toronto was close to $2,300 per month.
Commercial real estate is in extremely high demand.
Toronto's downtown office market is the second-fastest expanding in North America, behind only New York City. The demand for housing is great, and the vacancy rate is at an all-time low, according to the data. As a result, corporations are willing to pay top money for any available space when it becomes available because the competition is severe. Toronto's commercial real estate market has been attracting several high-profile technology companies in recent years, including Uber, LG Electronics, and Microsoft, among others.
When it comes to the resale condo market, both transactions and the absorption rate (the ratio between the number of units sold and those on the market) have increased significantly from the previous year, which was to be expected given the reluctance caused by the health crisis at the time.
Affluent buyers who missed out on a chance to get into the market while there were still some bargains available can expect prices and competition to rise even further once immigration levels return to normal. However, they can always look to other, more distant parts of southern Ontario, such as those where it is still possible to purchase a home for less than $250,000.
The Buckingham at Grand Central Mimico Photo Credit: buzzbuzzhome.com