Are you thinking about selling your condominium? Now may be the right market – but does that mean it’s the right time for you to sell?
If you bought a condo in Toronto four to five years ago, you might think now is a good time to sell. Toronto condo prices are on the rise, according to Condos.ca’s PSF Index: Since February 2017, the average 800-square-foot condo has gained about $78,000, and condos bought in 2012 have appreciated in value to close at $130,000 $. But does this growing market mean condo owners should wait until prices go even higher, or sell now?
To sell or not to sell…
As the PSF Index shows, it’s a good time to sell. Increasing the value of your condo means that if you sell it now, you can reinvest those higher profits into buying a new property, further increasing your equity. If that’s your plan, then selling now is wise so you can also enjoy the increasing value of your new property. Many condo owners are hesitant to sell right now because these values continue to rise – they could get a higher resale value if they wait another year to sell – but it’s important to remember that the rest of the housing market is on Value wins, too. A year from now you will be faced with higher asking prices than today and this can make your investment less profitable in the long run.
Then, of course, there are these looming price corrections. If the real estate market is experiencing tremendous growth now, will it only lead to a decline? Price declines are difficult to predict; However, it’s also important to remember that high growth leading to a decline mitigates the effects of the decline (if you’re earning 15 percent in market gains leading to a 10 percent decline, you’re still around 5% up). meaning that due to the high growth rate of Toronto’s housing market (particularly in Toronto’s core) there is not much likelihood of prices falling under what you pay initially.
The pros and cons of choosing a new condo
We’ve found that now is a good time to buy, but that won’t help you figure it out What you should buy New Condo or Resale Condo – Which is the Better Investment for You? Here are a few pros and cons of each option.
Advantages of buying a new condominium:
· Lower purchase price (depending on market conditions).
· Better siting within the building (if applicable).
· Greater range of options and/or upgrades.
· Reduced risk of costly and disruptive repairs and renovations.
· Warranty protection for new homes.
Disadvantages of buying a new condominium:
· You may need to rely on artist sketches and floorplans to get an idea of the finished product prior to purchase. If this is the case, be sure the unit’s boundaries, location, finishes, materials, furnishings, etc. are clearly stated in the bill of sale.
· You pay your deposit before you move in, which means that it can be tied up during the entire construction period.
· It can be more difficult to obtain a mortgage from a financial institution for an unregistered condominium.
· Construction delays may mean that your unit will not be ready on time, requiring you to seek short-term housing.
· If your unit is ready first, you can move in while construction continues in other units, exposing you to noise and disturbance.
Buy before you sell and grow your investments
It’s important to remember that just because now is a good time to sell a condo doesn’t mean you necessarily have to or should sell it. It’s a good opportunity if you’ve already thought about it, but also don’t feel like you have to rush to sell your Toronto condo. Indeed, if you are thinking of selling, today’s market presents you with a good opportunity to increase your equity and investments by buying a new property before selling your old one.
Why is it a good idea to buy now before you sell? Because today’s market is a strong seller’s market: The combination of low inventories and high demand ensures fast selling times. For example, the average number of days a $500,000 to $1 million condo stays on the market before it’s sold is 29 — and most don’t last that long. All you have to do is use your current real estate assets to open a line of credit and secure the down payment and purchase cost in a new mortgage. Once you have secured your new purchase, you can easily sell your old condo.
Buying before you sell allows you to take advantage of rising condo values by buying your new condo at a lower price and selling your old condo at a higher price. The difference could affect your ability to grow your equity.
What does it mean to increase your equity? It means investing in a higher quality property so your investment can continue to grow. If you currently live in a one bedroom condo, look for a larger unit or two bedroom condo for your next investment. You don’t want to move sideways through the condo market, even if the condo’s appreciation makes it seem like a good investment, because property transfer taxes, REALTOR® fees, and attorney’s fees can eat away at those gains. Climb the condominium market by investing in something with more value, making your investment work harder and more effectively for you.
Alternatively, you could increase your investment by keeping your old unit and renting it out: The current average rental price in most Toronto neighborhoods can actually cover monthly operating expenses, including your mortgage payment, maintenance fees, and property taxes, often with a small profit margin (which you can afford anyway want to keep to a minimum to minimize taxable income).
In short, now is a good time to own a condo, especially if you’re looking to invest in financial growth, whether you’re looking to increase your equity by selling or renting out your current unit.