The Toronto Condo Market - July 2017

Why the Condo Queen has Finally Decided it’s time to hold off.... IF YOU ARE AN INVESTOR...This is a MUST read! 

After years of marketing pre-construction condos both in and out of the downtown core, I am officially telling everyone to hold off on the purchase of most of the pre-construction condos in the city!

Here are 4 major reasons why you should re-consider:

1. The general cost per square foot for a pre-construction condo is a lot more expensive than a re-sale counterpart. You are looking at $100 per square foot or more on a pre-construction purchase.

2. The returns are getting smaller and smaller.  Many investors have already left Toronto for Montreal now due to the high cost per square foot.  While Montreal does not have the same population growth as Toronto, they are much more cost effective. 

A new undisclosed building, in the city's downtown core, just came out with prices at $1,200 per square foot near a major university claiming to provide future living space for the university's students. While buying a unit for your student child to move into or buying for your own personal residence may hold intrinsic value, using them as rental driven source is not worth the investment. The returns are simply not there! For example, if you purchase a unit with current rates on a 5 year mortgage of 2.74% and with a 30 year amortization you will need to make $2,500 in rent on a 500 square foot 1 bedroom unit, $3,300 on a 680 square foot 2 bedroom unit, and $4,400 on an 855 square foot 3 bedroom unit. You will most likely be short on rent by approximately $500 per month at current rental rates.

Mortgages rates have also remained consistent throughout the years, but are now showing signs of an upward trend with one increase already in place, how many more will come between now and the final closing.

3. Who are buying these units?  With freehold housing in short supply, the need for new condos is increasing, however most condo projects in the downtown core are emerging at $1,100 per square foot. On a 500 square foot unit that is $550,000.

A single person earning approximately $80,000 a year can't reasonably afford this cost even with a 20% down payment.

The other drawback is that you would have to re-sell the unit at $600,000 to break even after final closing costs and most people in the Toronto market are not quite ready to purchase a 500 square foot unit for $600,000. We are just simply not there yet!

4.  There are GREAT opportunities in the re-sale market! The market has cooled off from the craziness of January through April of this year when it was mostly foreign money driving the market.  Generally speaking, there are currently 20,000 properties available for sale in the GTA which is more than 4 times what there was available in March. In some cases, consumers are highly leveraged and are willing to sell their re-sale properties at way better value than some of the current pre-construction units on the market.

Purchase a re-sale unit through our team and we will assist you with finding the ideal tenant, we also offer a 3 year free rental property management service so that you can rest assured that your space is tenanted and managed for 3 years.

If you would like to book a consultation meeting to discuss all the opportunities available to you in the re-sale market (including some limited investment deals in the pre-construction world), please contact us.

Feel free to email us back, we would love to hear from you!