There’s no one-size-fits-all answer when it comes to determining if it makes sense to buy a condo in Toronto. The housing market is always changing and there are many factors that go into deciding if this is the right time for you to buy. That’s why we want to make sure we give you as much information as possible while you’re looking at Toronto condos for sale so that you can figure out if it makes sense for your situation.
Should You Buy A Condo In Toronto?
When comparing different types of properties within Toronto, the idea of buying a condo is an attractive option, especially for a first-time homebuyer. A couple of things people think about are:
- The convenience of having amenities in close proximity
- No yard or upkeep typically
- Amenity packages (pools, gyms, etc) tend to be better than neighborhoods inside the city
- Generally, the building makes condo units feel more secure
Toronto Real Estate Market Trends
There is more to consider when determining if it makes sense to buy a condo in Toronto though. The real estate market in Toronto is hot and has been for some time. When Covid-19 swept through in the spring of 2020, the real estate market froze until people figured out how to navigate life during a pandemic. It didn’t take too long until people were buying and selling properties again.
Things were different this time though. When everything shut down, if businesses could operate remotely, they did. This shifted the needs and wants of a lot of homeowners. It became a common theme for people to trade their urban condos for detached homes with more space in the suburbs.
Detached homes are naturally more expensive, but with the higher demand for this type of property, prices went up, and the competition got stronger. Because of this, many potential buyers were priced out of single-detached homes.
Is Buying A Condo In Toronto Worth It?
Even though this shift left condos as virtually the only option for new homeowners, buyers didn’t exactly jump at the opportunity. The numbers reflect this as there was a lull in the value of condos throughout 2020. Buying a home is a huge investment and commitment and people didn’t want to spend money on something they didn’t think would have much ROI.
As restrictions lifted and things began to open up again, people wanted back in the city and interests in owning condos in Toronto skyrocketed. Just to show you how much, in May 2021 the average price of condos in Toronto jumped 17% from the previous month alone! In fact, Toronto condos have risen by 52% since 2015! If you’re concerned about gaining equity and having a good ROI, buying a condo in Toronto may be a safe place to invest for this reason. There’s no obvious threat to this changing any time soon as the trend pre-COVID was on the rise as well.
Another thing to consider is rental demand. Not only does it look promising to gain substantial equity in buying a condo in Toronto, but the demand for rental property is high. Even when people moved to the suburbs, the demand for rental property never wavered. With immigration continuing to rise in Toronto and now that colleges have resumed in-person classes, the demand for rental properties has continued to rise. Renting your condo will help offset and cover your mortgage payment each month.
Should You Rent Or Buy In Toronto?
When comparing the numbers on renting vs buying, there are compelling reasons for a person to choose one or the other.
Easily the hardest issue with buying a condo is the down payment. The minimum amount a person can put down on a property in Toronto is 5%. Condos have been averaging about $500,000, which makes the down payment $25,000.
The average cost of rent per month in Toronto is about $2,200. Add that up over the course of a year (12 months) and that equals $26,400. In a year’s time, a person spends more renting than the cost of a down payment for a condo.
Let’s see what this looks like long-term to determine if it makes sense to buy a condo in Toronto. We will create a couple of basic hypothetical situations and stick to round numbers to start out. If you rented a condo for 5 years at $2,200/month, you will have paid $132,000. Say you bought the same condo for $500k instead. After five years, you paid roughly $68,000 towards the principal of your mortgage and about $77,000 in interest; this totals to $145,000.
Yes, you will have paid more for owning, but let’s look deeper. Over the course of five years, the equity in owning your condo will have likely increased. If your condo’s value increases by 5% per year, the market value will have increased to $638,141. This means you will have made over $138,000! If you had kept renting, you wouldn’t have profited anything.
Another Thing To Consider Before Buying A Condo In Toronto
When determining if that’s what you want, also think about where you’ll be in 3 or even 5 years. Does it make sense to buy a condo in Toronto to get you where you want to be in a few years? Or do you know you could be moving sooner than later?
Is Buying A Condo In Toronto Worth It?
If you decide it is worth the sacrifice of saving up for a down payment to have positive long-term results, figure out a game plan to achieve your goal. The thought of saving up for a down payment can seem overwhelming. It’s a lot of work, but saving now will eventually pay off financially.
When it comes to buying a condo in Toronto, the decision is yours. We hope that these points have helped make your decision easier by taking some of the mystery out of renting vs buying.