Not a week goes by without the media fretting about the potential crash of the condominium market.
And with reason.
Condominium living has become the dominant housing form in our urban centre and, amidst the sea of construction cranes which blanket the city, there's a further 60,000 suites to be delivered to Toronto Buyers over the next four years.
So when we received this question from one of our prospective clients, we decided to answer it as this month's 'Dear Urbaneer' post.
We're considering buying a condominium to help our son get into the housing market.
However, we find it all a bit overwhelming and don't know quite where to begin.
Can you give us some fundamentals which will help steer us on what to consider?
Here's our response:
"Dear Prudent Parents
In today's marketplace, we think it's integral to exercise caution in choosing the right condominium. After all, you want to assess all the fundamentals of what makes one condominium a better investment over another. Here are our three top factors which influence the market value of this housing form.
Where a condominium is situated ultimately plays an integral role in how much a suite is worth. Just like a freehold dwelling, its proximity to public transportation, shopping amenities, green space, and its overall accessibility (be that in commuting to work or being near to lifestyle amenities) all factor into the price tag. What's important to note here is that older condominiums, which may not be as 'trendy' as newer product, are frequently in more established superior locations and cost less on a price per square foot. So keep this in mind when you're assessing the value matrix in determining what a condominium is worth to you based on your location and spatial needs.
Remember, location matters!
2. The Building Components
The second factor has to do with the value of a condominium's bricks and mortar. By this we mean the condition of the building's structure and common areas (lobby / hallways, underground garage / lockers, elevators, recreation spaces / pool, outdoor spaces, etc.), the maintenance and repair of common building components (windows, HVAC systems, plumbing, wiring, roofing), and how well-managed the complex is. Make sure you review all the pertinent info including the engineer's report and Reserve Fund in order to assess how physically and economically stable any condominium is. Your due diligence should include understanding the condition and life span of all collectively owned systems. Note, this is partly why older condominiums tend to have higher common fees and lower purchase prices. The higher fees take into account the ongoing maintenance, repair and replacement of older building components, and the lower prices tend to offset this reality while acknowledging they might not be as stylistically 'trendy' in finishes.
We also believe that there are several intangible factors at play, including reputation of the building (ask your realtor, friends in the know, or even residents of neighbouring buildings for the scoop - gossip can serve you well when sleuthing out real estate), the ratio of owner-occupants to tenants (the more owners the greater the collective pride of ownership) and how harmoniously the residents, building management and condo board interact with each other (ask for copies of the minutes for any board and community meetings to get the real skinny). Each have bearing on the value of a condominium.
Of course, there is also the condition and presentation of the unit itself. The calibre of suite's interior finishes, space plan design, sight lines / view, outdoor space (if any) and style each influence what a property is worth. From our perspective, although we're finding our condominium buyers have a greater selection of listings to choose from, finding 'special' can take time. If you're looking for a thoughtful space plan, a terrace, high ceilings, abundant natural light and a pleasing vista in a dynamite location you may have to be patient and wait for 'the one'. To protect your investment, we recommend that you purchase a condominium which is 'special' that you can hold for the long term. And DON'T buy a suite in a super high-rise. As glamorous as these tall towers are presented, do not forget that the value of any condominium high-rise suite is dependent on the most desperate of Sellers. If you're in a 50-storey 400-unit condominium that has 200 one-bedroom suites similar to yours, the ability for it to increase in value is essentially at the whim of the most desperate of sellers owning any unit similar to yours. Our advice? Buy a condominium which is the least likely space to be replicated in the neighbourhood you're buying in. For example, a vintage loft condominium in a great neighbourhood will hold its value better than a unit in one of the multiple high-rise towers in CityPlace.
3. Lifestyle Amenities
There's also the 'lifestyle' value associated with each building. Do you want a lot of amenities like a swimming pool, gym, guest suite or party room? If these aspects are important to you then you'll place a greater value on them than someone who doesn't require these sorts of features. Also, the more amenities there are, the more it will cost you in your monthly common fee. Keep in mind that the greater number of units the more people are paying for the collective expense of operating those amenities, which can be a good thing. Also, you may be looking for a building that has a similar resident as your own profile, so be cognizant of what the make-up of each building is. You don't want to be a young hipster surrounded by grandmothers, or vice versa, do you? Also, be aware that you can two buildings opposite each other and one is very expensive, and home to the rich, and the other moderately expensive and home to busy working professionals. Be aware of your own profile (demographic, cultural and socio-economic make-up) and be aware how that fits in with the overall resident profile of the building you're considering. Not sure who lives there? Ask the concierge or property manager.
In a changing market it's critical you carefully analyze all the factors which have bearing on a condominium's value. The more you ensure a property has the right balance of location, condition, features, and 'lifestyle' - and the less likely it can be found elsewhere - the more likely it will weather any transition in the market while retaining broader resale appeal.
~ Steven and the urbaneer team
Do you have questions?
At urbaneer.com we're here to help, all without pressure or hassle. We simply love what we do. With a multi-disciplinary education in housing, sound knowledge of the mechanics of real estate and a sharp skillset in evaluating properties for over two decades, we're here to guide you through all the factors which play into establishing the value of any condominium.
If you, or someone you love, needs assistance, insight, or guidance maneuvering today's market realities as they pertain to you, just pop us an email or pick up the phone at 416-322-8000.
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your Bosley TOP TEN realtor