Why A Condo Might Be Better Than A House Right Now

According to the Toronto Regional Real Estate Board, demand for home ownership in May was very strong for both houses and condos. If you’re considering entering the market when housing prices are red hot, you might want to consider choosing a condo instead. Here’s why:

Prices are Reasonable, The Stress Test Is Not!

Housing prices are so high right now that it makes the first wrung of the real estate ladder highly evasive. In May, while detached and semi-detached houses in 416 areas sold for an average of $1,716,272 and $1,326,153 respectively, condos remained at an affordable $716,976. Combine these prices with the new mortgage stress test that came into effect on June 1, and you’ll find that your buying power is greatly reduced. The new stress test makes it even harder to qualify for a mortgage. While the government hopes this will help equal the playing ground so that inventory is closer to demand, it’s leaving many first-time buyers out in the cold. So while you might have qualified for $500,000 in May with the minimum qualifying rate of 4.79% today, that amount is now just $479,000 with a new qualifying rate of 5.25%.

Less Risk of Overpaying

Because demand is high and inventory remains low for houses, you have a higher risk of overpaying for a house in Toronto right now. The competition out there this summer is fierce which means you’re more likely to face bidding wars. You really don’t want to get into a bidding war when asking prices are already high. The combination of limited inventory and desperate people trying to find a house creates the perfect storm for emotional offers that lead to overpayment. From a numbers standpoint, if you look at year-over-year average price increases in the GTA, detached homes increased by 37%, semis increased by 22.6%, and condos increased by just 9%. This shows you’re less likely to overpay for a condo, as increases have been meagre compared to houses.

Backyards Aren’t As Important

As we enter into what hopefully proves to be the last days of a socially-distanced world, outdoor spaces aren’t as important. When you choose a condo as your first home, you don’t have to contend with all the work required to create an outdoor space. Having your own property is wonderful, but it also takes time and effort as it’s not just chores like mowing the lawn and pulling up weeds. If you have a backyard, you’re going to have to fill-up flower beds with plants, invest in patio furniture, buy a barbecue and maybe some nice lights, which costs a lot more money than you might think. So while a backyard was important last summer, this summer things are looking up. And don’t forget you can always look for a condo with a rooftop common gathering area, shared barbecues, or your own private balcony or terrace.

Easier First Home

Last but not least there’s also general upkeep and paying out of your own pocket for things like plumbing problems, HVAC issues, and more. A condo is an easier first home where you can ease into home ownership, avoid investing too much money in things like your garden, and getting too far into debt.

If you’re considering a new home in Toronto, speak to me today. I can help you explore the pros and cons of condo ownership and find the perfect dream home even in this hectic real estate market!