Photo: James Bombales
While many first-time buyers look to condos as a relatively affordable option, one Toronto housing market expert says that it is actually less expensive to buy a low-rise home in the GTA.
According to Realosophy Brokerage co-founder John Pasalis, when you control for the size difference between low-rise and condos in the GTA, condos are more expensive per-square-foot.
In the Maple neighbourhood of Vaughan a 1,385 square-foot rowhouse costs $685,000, while a condo of a similar size in the area would likely cost $684 per-square-foot, or $947,000. It’s just one example of a price difference that can be seen across markets in the GTA.
Pasalis believes that this discrepancy in prices can be chalked up, in part, to investor demand.
“The majority of new condominium construction is driven by investor demand — not demand from families,” he writes in a recent blog post. “Investors are willing to pay much more (on a per-square-foot basis) than end users are.”
Pasalis says that investors prefer smaller units, which typically have a better return on investment, which means that developers are creating units that are too small for families, at prices they cannot afford.
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“When developers are pricing a unit, they’re thinking to themselves, why would I charge this much when I can get this much?” Pasalis tells BuzzBuzzNews. “And those prices don’t make sense for a two- to three-bedroom unit, which is likely why we’re not seeing as many of those units being built [in the GTA.]”
In order for a condo to be good-value-for-money for a young GTA family, Pasalis says that low-rise prices would have to increase at a much faster rate than they currently are.
“The rate of appreciation for low-rise homes in the 905 region isn’t going to be very high in 2018,” says Pasalis. “So I don’t see this trend changing in the next year or so.”
While Pasalis admits that for families with a budget of $400,000 or less, a condo may be the only option for homeownership, he says that those with one of $700,000 or more should consider their options.
“They can choose to buy a two-bedroom 1,000 square-foot condo in Maple for that price, or a three bedroom 1,385 square-foot row house with a finished basement and backyard. For most, it’s a pretty simple choice,” he says.