Is It Worth Buying Into the Toronto Condo Market?
One look at the Toronto skyline and it’s plain to see that condominiums are taking over. Cranes have been a constant part of the landscape for several years, and new buildings seem to be popping up on a regular basis. As the demand for Toronto real estate increases, it only stands to reason that enterprising developers, contractors and investors will take advantage. And what better way to maximize profits and give the public what it wants, then by building up?
Of course, accelerated growth can’t keep up for ever, and there will come a time when it slows down or comes to a grinding halt. Some people in the know feel like this slow down has already begun, some feel as though there is a big housing bubble getting ready to burst and some feel like the growth will continue. The real question is, if you’re looking to invest in a new building or buy into the Toronto condo market for an income property, is it worth your while?
According to a story printed in the Toronto Star, there are currently about $25 billion worth of condos under construction in and around Toronto. Supposedly, 20,000 condo units will be finished during 2014 and one research firm predicts a slow rise in condo sales during the year. During the fourth quarter of 2013, nearly 4,300 units were sold, which was a jump compared to the previous couple of years. Close to 13,800 condos were sold in 2013, which was more than estimated but less than the average over the previous five years.
The numbers for 2014 are estimated at around 15,500 condo units sold, but without the annual average six percent price increase that has been evident since 2005. It is expected that deals may be available for Toronto condos during 2014, as developers try to sell off the 19,000 unsold units that remained in the city at the end of 2013. Around half of that number pertains to units where construction hasn’t even started.
Too Many Condos?
Naturally, the fear that many people have about buying into the Toronto condo market is a situation where the supply exceeds the demand. Having a bunch of empty buildings in the city, or construction projects stalled due to lack of interest isn’t very exciting from an investment standpoint. Even if you do get a great deal on a condo, if there isn’t anyone interested in buying it or renting it, the investment isn’t worth a thing.
Currently, a lot of the demand is centered around the downtown core, which is why many new projects have cropped up in that part of the city. Many young professionals want to be right in the action, and a downtown condo is the ideal way to do it. Downtown condos also make great rentals for tourists or people in the city for business. Any information about the supply of Toronto condo units outnumbering the demand is just speculation, and it will always be speculation until something happens.
Only Time Will Tell
In the end, only time will tell if the developers have extended themselves too far with all the new buildings. With so many people in and around the GTA, it seems like you could never stop putting up buildings and they would always be filled, but the reality doesn’t play out that way. Some developers have had trouble finding financing for their projects because they aren’t able to sell enough units to satisfy the banks before everything gets started.
If the housing bubble that some people predict is imminent actually bursts and the market falls apart, then many people involved in the Toronto condo market will suffer. If you are considering buying into a condominium that has yet to start construction, you are doing so with a certain degree of risk. This is based on the statistics of the past few years in terms of sales and number of buildings going up.
That doesn’t mean it is a bad investment, or that you will lose your shirt in the deal. It just means that unlike five years ago, or even three years ago, you can’t just dive in and expect a big payday out of it. You should talk over the pros and cons with a good financial advisor or mortgage broker and determine which scenario is best for you to invest in, or if it’s wise for you to buy in at all. There are units for sale, so take your time and make a decision that will benefit you and your real estate goals, now and in the future.
Author name: Willard Strong
For me, researching on the economy is exciting as its various possibilities and opportunities lie in every aspect of life. These researches allow me to help out people who find it difficult in finding a source or figuring out what to do with the resources that they have. Basically, I am an Economist. Follow me on Twitter @ https://twitter.com/Willard_Strong