If you’re interested invest in real estate in 2019, and you are wondering whether a condo is a good investment or a house? The truth is, there is no right or wrong answer and the better buy depends on a lot of factors including your plan, lifestyle and your budget.
If you are a plan is to invest in a condo rental then you need to know that Toronto condos are highly sought-after properties, with shortage in supply, and intense competition between buyer. It happens sometimes the price of a condo in some desirable neighborhood in Toronto, with easy access to transit or shopping districts higher than a house in GTA. So, location is also another important factor that need to be considered before a decision is made.
According to the national release in 2019, average home prices in the City of Toronto rose 5.8%, while the overall GTA's aggregate home prices rose 3.4% in the same period. The price of a home in Canada increased 2.7% year-over-year, below the long-term norm of 5%. But condominiums remained the fastest growing housing type on a national basis, rising 5.4% year-over-year. So historically purchasing a condo in the city of Toronto has been a good investment.
The overall cost of condo versus a house depends on the size, the market value and the cost of living in the area can vary significantly. Although the costs per square foot in a house and condo may be similar, but, condo’s are still more affordable than a house and generally they require less upkeep and maintenance.
However, keep in mind that sometimes some condo fees are so expensive that can be as high as your monthly mortgage payment. In Toronto, the average condo fee is estimated to be close to $0.50 per square foot but can reach as high as $1.00 or more. That means the condo fees for an 800-square-footcondo could easily cost between $400 and $800 a month. Also, some condo board may restrict how you use your own property and make it difficult or even prohibit renting your condo unit to others.
On the contrary, investing in a house gives you more freedom and flexibility in terms of implanting your own ideas or rules. When you purchase a single detached house, you own the land VS a condo unit you only own airspace inside the walls, and all exterior elements are held in common area.
Another way to understand which property type is better for investment is by evaluating your return on investment (ROI) from revenue you are expecting to receive from a rent. If your revenue you’ll generate from your rent is higher than your expenses (mortgage, property taxes, condo fees, ongoing maintenance fees, etc.), you have a positive cash-flow. However, a negative cash-flow isn’t necessarily a bad investment but knowing the difference will help you make an informed purchase decision.
You also need to know if appreciation on the property you purchase is more important for you or the cash-flow generating form the rental income or both.
Real estate appreciation takes place because of factors like population growth, location, demand and supply, inflation, infrastructure, household finances and consumer confidence, which are major drivers for the appraisal in the property value. With Toronto’s downtown core gaining so much attraction, it’s natural that demand is spilling out and across the Greater Toronto Area.
The bottom line, purchasing a home whether a condo, or a house will be one of the major financial decisions you’ll make in your life. Do your research and take advantage of a real estate expert advice to identify the best opportunities available in the market for you.