We are fielding many questions from past clients and new clients about the timing of a Toronto condo purchase in 2022. None more prevalent than “Are Condos A Good Investment?”. We have several thoughts to share with you as you navigate whether purchasing a condo makes sense for you.
In short, yes! Rain or shine, Toronto condos are an excellent long-term investment.
There are many key fundamental reasons we support purchasing a Toronto investment condo. So, let’s dive into some essential information before you purchase an investment condo.
What Do The Numbers Tell Us?
House Values Skyrocketed
Last year, many condo owners felt desperate for more space, specifically a house. We have seen a huge increase in home prices since the Pandemic began. The gap between condo and house prices has become a chasm in recent months. Many what-would-have-been house buyers have realized that the option is no longer possible, so they have circled back to look at 2, and 3 bedroom condos as these are more affordable than houses. This has substantially buoyed the condo market – ultimately driving the entire market to begin moving again.
Immigration
Immigration to Canada cannot be stressed enough. Canada plans to add 350,000 people a year for the next five years. Yes, the new immigrants will move to all parts of Canada in year one. However, the past has proven that a vast majority move in years two and three to major metropolitan areas – Toronto, Vancouver, Calgary, etc. TRREB has been saying that the GTA gets about 200,000-250,000 people are year arriving from national and international locales for years. Here is the big point to keep in mind with the condo market: Canada has not changed its growth plan – there will be a backlog of new residents when we return to normalcy. That immigration count has been paused for a year at this stage and likely so for the short term. We can expect a massive flood of new immigrants that will require somewhere to live.
Condos are typically the landing spot for new immigrants as these are more affordable than houses. Toronto developers are not building many new freehold houses as there isn’t enough land available, and frankly, the density permitted with condos offers higher margins and ROI for these developers. Condos are where new buyers have to buy. We do not have nearly enough new condos developments coming to market to fulfill the demand. Despite what the media is writing about and the number of cranes you see in the sky. Toronto does not have enough condos for the growing population.
Low-Interest Rates
Many of our clients are snagging mortgage interest rates as low as 2%. To provide some perspective, the generation of 1980s buyers paid 20%, buyers just 15 years ago were excited to get a rate of 5.25%. 2% % is unprecedented in Canada. These low mortgage interest rates are likely here for quite some time – even the Bank of Canada has said low rates will remain until 2023.
Rents Are Increasing
We have seen leases bounce back with strength. Again, normalcy is on the horizon, and people miss the city. The life that we love will return to Toronto. There was a drop in condo rents of 15-20% downtown – there was very little demand in the summer of Fall of 2020. Now that the rates rents have stabilized, and people feel confident that Toronto life will return, they are acting on some great deals, which pushes the values back up.
Factors Boosting Consumer Confidence
Market Recovery Speed
No question purchasing a Toronto condo in the Fall of 2020 proved to be an excellent move for investors and end-users alike. Frankly, it was challenging to get showings on our listings at the time. It’s no wonder that condos were selling at a discount in the Fall and early winter: the future of condo real estate shorter-term looked somewhat bleak with the COVID-19 Pandemic in full swing. But, the page turned on 2020 and into 2021. We have been amazed by the incredible speed at which the condo market has recovered and continues to heal.
Some condos were trading at a 10-20% discount in the Fall of 2020. 2021 is proving a return to previous market highs. The long term is very bright for Toronto. Demand for condos is here to stay, despite the 2020 slowdown. Condo buyer confidence is back – which means stability moving forward. Read more to find out if a Toronto Condo Investment was a good purchase in 2021?
People Are Returning To Toronto
There is no question that the roll-out of the COVID vaccine assists with buyers’ confidence and hope that a return to normalcy is on the horizon. Who could blame people for not wanting to be in Toronto during the Pandemic? The aspects of Toronto that make it great had not been permitted: the arts, culture, concerts, excellent restaurants, socializing, and the vibrancy that we have come to love had been locked down. We have long been curious if those who purchased out of town would miss our world-class city’s engagement. Perhaps Boston Pizza on a Thursday night will only be fun for so long? It’s hard to beat Toronto’s great culinary options on any given night.
➤ Every good investment needs a well-planned exit strategy. Start preparing with:
- 5 Tips for Selling Your Condo in Toronto
- Frequently Asked Questions when Selling a Condo in Toronto
- Timeline For Selling A Condo
- Selling a Condo With a Tenant
Planning Your Purchase
Timeframe For Buying A Condo
When wondering whether condos are a good investment, for the most part, you cannot go wrong in the long term. Most real estate-aware Torontonians know full well that the condo market has skyrocketed over the last five years—double-digit percentage increases in value nearly every year. But if we look back to the preceding decades, the value increase of condos was more in line with 5%.
So, we should expect that the value will revert to the mean in time. All this goes to say that timeframe of ownership is critical. Owning for less than three years is speculation, not an investment. It’s quite frankly a gamble that the market has increased. It’s safe to say we all know someone who has “succeeded” in this approach over the last three years. That’s luck. Being at the right place (and price!) at the right time. No one foresaw the considerable increase in value to come this quickly. No one. It’s fortunate to have enough capital on hand and the necessary bank financing to pull the trigger – the rest has been a matter of “a rising tide raises all boats. Some exceptions can negatively and positively impact the amount of success you can expect. Keep reading to find out how.
Over the long term, we need more condos in the city. Toronto will continue to be built vertically. As the key, central, and finest neighbourhoods are built skyward, we will see the outskirts fill in. Buying now is a good move. But, HOLD. Always hold real estate for as long as you can. Holding is how the most significant wealth is built throughout history. Then leverage what you have (wisely), which we can guide you through.
Picking a Condo Based on Location
Buy in areas where people want to live. Not where people will “have to live” in time. What I mean by this is that buying the desired location is vital. The areas that are not well serviced by the TTC, restaurants, cafes, and businesses will not perform nearly as well. Depending on the real estate landscape over the next ten years, it could be a long wait to see a good increase in value.
➤ Here are some neighbourhood by neighbourhood condo guides to get you started on your research:
How Unique is the Condo?
Buying a unique condo is the best investment. Redbrick lofts are the best in the city. Buying high-end quality in a neighbourhood like Yorkville is a great move as well. Simply buying a glass tower full of drywall will not be as strong as an investment. That being said, the acquisition cost will be lower, so you can argue that you at least got into the market.
➤ For more information on buying an investment condo, check out:
- 4 Condo Investment Mistakes (To Avoid)
- Condo Purchase Checklist
- Our Guide To Toronto Investment Properties
- Questions To Ask When Buying A Condo in Toronto
There are a myriad of reasons why we believe that it’s an excellent time to buy a Toronto investment condo. The investment plan is critical, how long you want to hold the condo for and your options. We are here to guide, advise and lead you with professionalism every step of the way.
Contact us here – we are approachable and will help you get started today!
Hi,
Based on your assessment, would you see solid increases in the Mississauga area for condos near the square one mall??? At the moment, like for like in the one bedroom plus den plus bathroom and parking/locker category, condos there are about CN$250,000/- cheaper than downtown – that’s about 30% cheaper and there’s LRT coming there too!!! Thanks!!!
Hello – thank you for leaving a comment. The most honest answer is “it depends”. Specifically, it depends on the specific building. Overall, Mississauga has become a major city and the fundamentals are solid. That being said, Toronto will outpace surrounding markets due to the diversity of business, higher income and larger population (ie, more demand). Shoot us an email if you have any other questions. We are always happy to help.
hi
Based on your assessment would you say buying a condo in Brampton now on a 10year old building on queen street close to a lot of amenities a good idea. price $411 k
Hello Renae – thank you for the message. As in all condo purchases, it is essential to look at the location, the builder, layout, amenities and myriad of additional aspects. If you are looking for specific assistance, feel free to reach out to us via email or phone.