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Yes, I'm bullish on property investment: I'm in the market right now. But condos appear to be hitting a critical stage in the real estate cycle and I'm convinced a major correction is imminent.
A dear friend of mine, who sold his East York bungalow to move into a swank downtown condo, is thinking of buying an investment condo.
This preliminary discussion came just after he learned that his partner of three years has already made $110,000 on a pre-construction condo (estimated date of completion sometime this year). Now my friend is thinking of cashing in on the condo craze. And I’m a little worried.
Particularly when stories about condos in a state of disrepair are starting to pop up in the papers. (Apparently years of low fees have left one condo complex in Toronto’s northwest in a sorry state.)
But what worries me most —particularly for condos outside of any urban core — is that the value of the structures and the units seems to depreciate over time.
While not at all scientific, a quick scan on MLS (the realtor’s multiple listing service) shows more than 30 condo units in the Greater Toronto Area for under $125,000. Most of these units charge $500 or more in monthly maintenance, with some as high as $700 per month — these are units found in older high-rise buildings.
While I’m certainly bullish on property, I’m not as crazy about condos as an investment. Given that a major advantage of real estate investing is the appreciation of the asset, I just can’t see how these older properties are going to compete. Worse: I wonder what a glut of these older units will do to all the new buildings now entering the market?
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