Is this a stupid time to buy a condo?

ERIN

NewBee

6

Is this a stupid time to buy a condo?

Everyone's talking about how the real estate bubble in Toronto is going to burst, and how in a few years there will be way more condos than people to live in them.

Is this a stupid time to buy a condo, or is it still a good investment if I get it for a good price, and plan to hang onto it indefinitely (through any sort of market dip, etc)?

9

Toronto / New Home Q&A

ANDREW LAFLEUR

Buzzer

99

24

3 BEST REPLY

@Erin
The reality is if you think the market is going to go down tomorrow, why would you invest today? You wouldn't. So you need to decide where you think the market is going first. You will only invest if you think there is an upside. If you want to know what I think about the market, check out my blog here: truecondos.com

Now, it sounds like what you are talking about is not investing, but rather, buying a condo for yourself to live in, which is a completely different thing. There is never a bad time to buy a home for yourself. Your home should first and foremost be a home and it should meet your needs today and in the foreseeable future. If it turns out to be a good investment, then great. If you want to keep the property in the future as an investment property then great, that will factor into your needs analysis when you buy the place, but don't get confused at the start! I see too many first time buyers get caught in a sort of decision paralysis because they can't decide what they are looking for. Decide if you are buying an investment property or a home, then go out and buy it!

hope that helps!
Andrew

BRIAN JERONIMO

NewBee

6

3

2

My opinion on this is that it is not a stupid time to invest. If you are able to get into a project during the early stages, buy one now. If in a couple of years this "bubble" does pop, hold on to it. Remember that the people who lose money are those who sell in a down market. If you can afford to hold on to it, then do so. Good luck!

MARCO DIFOTI

BabbleBee

476

12

@Brian Jeronimo I agree. If you look at your real-estate investments as a long term investment, then the short ups and downs never matter. If you look at your real-estate purchase as a home, then as well, the ups and downs do not matter. Long run, real-estate goes up.

Land is in short supply, and the population is growing.

@Erin Is this an income property, or a place to call home? What is your estimated timeline for holding on to it?

ERIN

NewBee

6

Thanks for your insight guys.

@Marco, it will be home for a couple years, and then plan to use it as an income property. Can hold on to it as long as I need to in order to turn a profit!

GORD SMART

BuzzStaff

168

21

Pretty loaded question. Real estate is location specific - within Toronto, like here in Vancouver, you buy location within location. Someone once said the best time to buy real estate is today, the best time to sell is never...

Careful (especially in a low interest era such as today), but leverage used wisely can be a good thing! Where the trouble starts is when people pay with 5% down, then the property goes down in the short term 6% ... and they panic!

Long term though, in a good location, a very wise investment. Make sure you have a substantial down payment (at least 20%) and you can weather any uptick in interest rates - which is inevitable.

MAXWELL SCHWARTZ

BuzzStaff

37

3

1

I think that if you are looking to invest my one piece of amateur advice would be to buy over 1000 sq. ft. if you can afford it. There is going to be a surplus of tiny spaces available in the near future and those won't appreciate nearly as much. There will be a big demand for larger places in the coming years.

YOSSI KAPLAN

NewBee

9

1

there's always money to be made, especially in a downturn market. the questions are, what are you buying this for? what is your financial strength? have you looked at monthly costs? have you pre-qualified for a mortgage? areas you'd like to look at? are you expectations realistic given current market conditions? what are the rents you would get for the property? are they higher or lower then your monthly costs? etc etc

ALLEN

Buzzer

129

34

It really depends what kind of condo and the location you are thinking of buying.
Remember that there will be a huge flood of condos that will be completed within the next 5 years, a lot of them concentrated in certain pockets in the city.
You have to consider what kind of competition you will be faced with in the future when you plan to sell. Which I agree with Maxwell's point that the majority of these new condos are smaller units in large highrise buildings bought primarily by investors, and there will be a growing demand for condos that not only have more than one bedroom, but condos that have more generous living spaces to entertain or to accomodate a small family, kitchens with full size appliances and more counterspace, more closet and storage space, etc.

I think preconstruction sales has been out of hand this past year and believe their pricing are very ambitious. I think the best bang for your buck would be buying resale in an older condo. They are priced much less per sq.ft., have more space, in a more intimate sized building, and often in more established neighbourhoods that are bounded by parks and older homes so you don't have to worry so much about new developments blocking your view. With the money you save you could afford a larger condo and/or renovate and customize the unit to your liking (or what is marketable), further seperating your place from the on slaught of cookie cutter new construction condos.
Also with preconstruction you will be facing with construction delays, paying phantom rent until the building is registered, building deficencies, etc.

Becausethis condo will be home for you for the first few years (maybe longerdepending on the market)you have to feel comfortable with your purchase and that it suits your lifestyle and financial position.

ALEXANDER KVITNITSKY

Buzzer

51

6

The condo market is depended on a few key factors:
1. Houses vs condos affordability - Based on the new mortgage regulations buyers would turn more towards condos as the first step in getting their feet wet in real-estate investing rather than houses.
2. Immigration to Canada - According to current Canadian statistics immigration has been strong so far.
3. House construction - Builders are currently focusing more on vertical developments rather than horizontal which in other words in results in a shortage in houses.
4. Apartment buildings - The city has not been working on putting up new apartment buildings that I heard of recently, which wouldyield a positive outcome for rental property owners/investors.

P.S There are a few risks of buying pre-construction condos (if that's what you're interested in), BUT the good thing about them is that you would normally buy them below normal market value of the area they are being built in, which in other words minimizes your risk of big losses if thats what the future holds for our housing market.

Thank you,
Alexander Kvitnitsky
www.Investment-Library.com

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