Many hopeful homebuyers in Ontario remain on the sidelines of the real estate market due to high mortgage rates and rising home prices. Despite these barriers, first-time buyers and families recognize the value of home ownership as a significant investment. This brings us to an important question: Are condos a good investment?
Economic and housing market conditions are always evolving. Changes in the Bank of Canada’s (BoC) policy rate could be a key factor for prospective homebuyers to watch in the coming months. Additionally, recent federal government policies may influence buyer and seller decisions this year.
For many, single-family homes have become unaffordable in numerous Ontario markets. Condominiums, however, continue to offer a viable path to home ownership. Let’s delve into whether condos are a wise investment in today’s market.
While there are risks in the condo market, purchasing a studio or one-bedroom unit, even in a major city, can be a great way to start your home-buying journey. For those willing to take on some calculated risk, a down market can present opportunities, just as an upmarket can have its challenges.
Let's examine the current trends in the Ontario condo market to help potential investors make informed decisions:
Greater Toronto Area (GTA): Sales Up, Prices Down
In the Greater Toronto Area (GTA), the condo market has shown mixed results. According to the Toronto Regional Real Estate Board (TRREB), condo sales increased by 5.3% year-over-year in the first quarter of 2024. However, the average condo price fell by 1% compared to the same period last year, now averaging $693,754.
As interest rates are expected to decline, condo sales might gain momentum, and prices could rise due to tighter market conditions.
"As first-time buying activity increases with lower borrowing costs later this year and into 2025, inventory will be absorbed, and market conditions will tighten," said Jason Mercer, TRREB's chief market analyst. "Increased competition between condo buyers will result in upward pressure on selling prices."
Condos and New Construction Trends
The Canada Mortgage and Housing Corporation (CMHC) reported record levels of condo and rental building construction in 2023. This trend is evident in major Ontario markets like Toronto and Ottawa. However, experts predict a slowdown in new starts due to reduced pre-build sales and higher borrowing costs.
The federal government’s focus on “densification” aims to address housing affordability. Measures such as eliminating GST on purpose-built rentals and a $15 billion program for apartment construction loans highlight efforts to boost affordable housing development.
Why Condos Are Still a Good Investment
Condos remain an attractive investment for various reasons:
- Affordability: Condos are generally more affordable than single-family homes. In April, the average price of a condo in Canada was around $536,000, compared to $812,000 for a detached house.
- Value Appreciation: While condos may appreciate at a slower pace than detached homes, they typically gain value over time.
- Amenities and Maintenance: Condos often come with amenities like gyms and pools, and they require less maintenance compared to single-family homes.
However, potential buyers should also consider factors such as monthly fees, special assessments, and possible rental restrictions. Ultimately, condos can be a great way to enter the housing market and start building equity.
