Despite recent inventories by the government, the market shows increasing investment in condos and specially pre-construction condos.
As business observers predicted a freezing Toronto real estate market for the first months of 2018, it happened by introducing STRESS TEST and foreign investor tax announced by the Ontario government.
During January 2018, there was a flattening in the housing market, but stats show that after this Governmental shock, it is returning to its sustained growth.
The primary analysis shows that only 5 percent of buyers use the overseas money for the direct purchase and many foreign investors prefer to use their relatives to bypass foreign investor tax. They may have family members, close friends or some other intermediaries here and they invest through them.
In long term, this tax will be ineffective unless government introduces new rules for more monetary clarification (which seems to be impossible in short term). Until then, foreign investors are using this loophole and their money is over flooded in the market.
On the other hand, raising the price of houses and lands, made it impossible to buy for end users. Therefore, they have no other choice and they are obliged to invest in the condo market.
Advanced rent controls are not depressing condo investment, but the boundaries could shift investors to sell their units more quickly and more securely.
According to stats, 30 percent of Toronto’s rental market was for condos, but this rate is rising year by year. More renters prefer to live in condos due to their limited budget and for their ease of living: Condo renters are not worried about maintenance, landscaping works, cleaning shared areas, plowing the snow etc.
The share of condo buyers is increasing as demand is going up. Even for first buyers, condos are turning to be more attractive. at first glance, it seems that condo owners should pay the maintenance fee every month and house or townhome buyers are not. This is only the tip of the iceberg. Stats show that house owners have more hidden costs than condo owners. The reason is very clear: when there is a need to fix a major problem in one of the house utilities, they call and pay much more than the time a professional property manager pays to plumber, electrician, painter etc.
Condo residents also have access to many amenities in modern condos such as fitness rooms, party rooms, pool, the guest suite which in the case of living in a house, they should pay for them separately and of course, much more money every month.
House buyers have another big issue that is unique and exclusive: neighbours.
In condos, your property is maintained by a company, as time passes, your unit, and your neighbour’s units, are expected to look equal many years down the road. which means property values aren’t likely to deteriorate based on shabbiness of your neighbour’s unit. But in houses, your neighbours may not maintain their property unless they have enough money to do, which can lead to decreased property values if nearby freehold houses fall into shabbiness.Among condo buyers, we also watch a rising trend to buy pre-construction condos:
- pre-construction purchasers are not worried about new mortgage rules because they have already been stress tested before introducing the new mortgage rules, so this new policy at least has no impact on pre-construction buyers.
- Buying a pre-construction condo is more affordable. They pay upfront costs during 1 to 2 years which is more attractive for mid class people.
- Upfront costs are lower by far in comparison to costs of houses or freehold townhomes.
- Some first-time buyers may not have enough credits to apply for the mortgage. Buying a pre-construction condo give them at least 1 to 2 years to pay their debts, build or rebuild their credits and strengthen that.
- pre-construction condo buyers will have some sort of peace of mind about new mortgage rules. Now, Government of Ontario started a kind of trial and error plan for Toronto housing market and the situation is not as crystal clear as last year. But new pre-construction buyer will have enough time before their mortgage application and till then, the mortgage market will hopefully be stabilized and more reliable.
Buying a pre-construction condo gives the opportunity to buyers for future assignment sale which is very attractive for both professional investors and real estate agents.
In conclusion, we predict a steady and reasonable raise in condo investment even by introducing new rules (By Government of Ontario). We strongly recommend putting your money in condo market and especially in new condos and of course, the most attractive ones of them: pre-construction condos.
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