First, I’d like to clarify: no two situations are identical, and there are no universal “one-size-fits-all” tips. In every specific case, preferences can (and certainly will) differ. For some, the absence of neighbors is critical; for others, the budget is the primary driver; some may lack the physical ability to mow the lawn, while others view real estate strictly as an investment. In all these scenarios, the ideal solutions and options will vary significantly.
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Today’s topic: what drawbacks I see in condominiums and what I advise you to look out for if you are considering this type of property for purchase.
Condominiums carry a monthly maintenance fee that you have virtually no power to influence. Furthermore, this amount has a tendency to rise—much like taxes, for some reason, I have never seen a decrease in monthly maintenance fees. While these payments go toward seemingly reasonable expenses (concierge, lobby heating, pool maintenance, roof repairs), being simply presented with a “fait accompli” regarding an increase can be quite irritating to some.
Since the attractiveness of a property is usually inversely proportional to its total carrying costs, an increase in maintenance fees effectively decreases the price of your property when you go to sell it. For example, there are buyers on the market capable of paying $3,000 gross per month. If your maintenance fee is $500, your client is someone capable of carrying a $2,500 mortgage. But if your maintenance fee jumps to $1,000, your client is now someone who can only afford a $2,000 mortgage. In absolute figures, this is a completely different property value: essentially, rising maintenance fees narrow your pool of potential buyers.
For this same reason, condominiums appreciate much more slowly than freehold homes (those without regular service fees) or townhouses. By the way, a “condominium” isn’t necessarily an apartment; it can be a townhouse or even a detached home. However, apartments are the most common example.
Price growth isn’t always the sole priority, but it is usually a vital component—looking 10–20 years ahead, the appreciation of your asset can be a decisive argument.
In a condominium, you face far more restrictions. What you are allowed to hang on your door, what flowers you can grow, what pets you can keep—even the color of your curtains might be subject to mandatory approval by management. On one hand, the rules of communal living have their place, but on the other—your opportunities for self-expression will be significantly curtailed.
Currently, the Toronto condo market is in a dismal state: negative cashflow for investors (the gap between income and expenses), a significant drop in prices, and difficulties with selling. All this suggests a questionable investment appeal for this type of real estate at the moment.
However, this does not negate the positive aspects:
Condos are usually more affordable. If you are on a tight budget (moreover, if this is your first property), it is sensible to consider the entry-level segment, keeping a close eye on the neighborhood, of course.
In a condo, you don’t have to mow grass or shovel snow. There is often a gym, sometimes a pool. If you aren’t a fan of home renovations and maintenance, a condo might be the right fit.
Condos exist in areas where detached homes simply do not. Example: Downtown Toronto. If you prefer living there for any reason, you don’t have many options between condo and freehold.
In general, from an investment perspective, we understand that buying makes financial sense when prices are low, and selling should happen when they are high. Right now might be the very bottom of the market. Buying today will be much more advantageous than it was, say, three years ago. The condo market is still trending downward, but no one knows exactly when it will pivot, and timing that moment perfectly is unlikely for anyone.
Would you like to calculate your potential monthly costs and see if a purchase makes sense for you? Call or write to me; I would be happy to answer your questions and suggest options for your specific situation.
Serge Skyba
Realtor® at Realty 7 Ltd, Brokerage
416-305-6525
serge@agent1.ca
P.S. By the way, don’t forget to check out my search service for estate sales and power-of-sale properties: www.UnderMarket.ca
