Wednesday, 2 March 2016

Is a Condo A Good Investment?

This post has been contributed by Brian Madigan, who is also a member of the Ontario Condo Group. Brian is a Broker with RE/MAX West Realty Inc. Brokerage in Toronto. 
This is a question that is frequently asked. Essentially, it depends upon your expectations and your analysis of an investment return. Traditionally, individual single-family homes have outpaced the return over time of other classes of real estate. So, for overall long-term appreciation, single-family homes offer the greatest prospect for reward. But, you must appreciate that it also means good well-located homes. If that is the case, then do you only include good well-located, well-managed condominiums?
It is often said that real estate is a good investment because they’re not making any more of it. However, that is really not entirely true when it comes to high-rise condominiums. You can acquire an excellent apartment on the 23rd floor of an expensive condominium. Ten years later when it is time to sell, you find out that the developer of your building is constructing a twin tower across the street. This new supply decreases the prices of the existing units already available in the marketplace. This generally doesn’t happen with single-family homes. The new houses are often located miles away and have a much lesser effect on the market.
Condominium apartments are particularly attractive to:
• First time home-buyers due to the price
• Investors because of the property management
• Empty-nesters who like to travel because of the security
• Owners who wish to have a specific location (ie. Downtown Toronto)
• Owners who wish to have a specific amenity (ie. waterfront property)
• Owners who wish to interact with their neighbours (recreational facilities)
• Third time home buyers due to the exclusivity associated with a higher priced properties
These particular factors all distinguish themselves from the single-family home statistics, rendering such comparisons essentially meaningless.
Over time, condominium apartments have proven to be worthwhile investments and many have demonstrated superior returns compared to other investments.