![\"\"](\"https:\/\/www.livabl.com\/articles\/wp-content\/uploads\/2021\/05\/presale-investors-tcs.jpg\")
<\/a>Photo: James Bombales<\/em><\/p>\nDespite the challenges Toronto\u2019s condo and rental markets have faced this past year, pre-sale condo investors have still fared better when it comes to both capital appreciation and cash flow compared to their resale counterparts.<\/p>\n
According to a GTA Condo Investment report published by Urbanation and CIBC Economics last month, new condo prices in the Greater Toronto Area grew by 27 percent across a three-year period that ended in Q4 2020. By comparison, resale prices increased by 18 percent during the same timespan, while rental prices plateaued after enduring a 13 percent drop in 2020 as result of the pandemic.<\/p>\n
Many of the pre-sale units that closed in 2020 were pre-sold more than three years ago, prior to a sharp rise in new condo prices in 2017. As a result, investors who locked-in prices that are now heavily discounted compared to current prices are experiencing \u201csubstantial equity accumulation,\u201d the report explains.<\/p>\n
Simon S. Mass, CEO of The Condo Store<\/a>, expects that price appreciation on pre-sale condos will likely continue.<\/p>\n \u201cAt the point in time when you purchase a pre-construction unit, the pricing is based somewhat on current pricing at the time, as well as an estimate on where pricing will be in the year that the unit is ready for occupancy, typically three to five years,\u201d said Mass.<\/p>\n \u201cThis has been the case for 20-plus years, so the value that buying pre-construction brings should continue for the foreseeable future,\u201d he added.<\/p>\n The report found that the average GTA rental unit had an ownership carrying cost of $2,077 per month, and achieved an average of $2,140 in rent after completion, which produced a small amount of positive cash flow. Sixty-three percent of investors were reported to be in a cash flow positive or neutral position in 2020, which is higher than the 56 percent share of investors in 2017, said the report.<\/p>\n Pre-sale investors were found to be in a better cash flow position compared to investors who bought Mass points out that this data set highlights the advantages to buying pre-construction and preferences among some consumers.<\/p>\n \u201cThere is something in these numbers that speaks to the consumer enjoying and gravitating towards newer, updated units, and I think the appreciation in newer inventory reflects that,\u201d said Mass. \u201cThis is always an advantage of buying pre-construction. When it\u2019s completed, you are getting a brand new unit.\u201d<\/p>\n However, Mass notes that there are many individual factors that play into cash flow analysis, such as mortgages, which can make it difficult to pinpoint cash flow trends. When consulting with clients and newer investors, Mass explains that TCS tends to focus on long-term capital appreciation first, then month-to-month potential cash flow.<\/p>\n<\/a>Photo: Juan Rojas<\/a> \/ Unsplash <\/a><\/em><\/p>\n
\nresale units and rented them out in 2020 \u2014 80 percent of the latter group were reported to be cash flow negative. More than half of new condo investors were cash flow positive by up to $600 per month, while less than 15 percent were cash flow negative by more than $400 a month.<\/p>\n