Purchasing either a house or a condominium is a big investment. Despite the Greater Toronto Area’s (GTA) recent run of high housing prices, a house is the safer investment than a condo with respect to resale and property value.
Here are a few reasons why buyers should prioritize making an offer on a house over a condo.
Why A House is Better
Historically, a house appreciates more in value than the average condo. According to the Canada Mortgage and Housing Corporation, the value of the average house has increased roughly five percent each year since the 1970s. While the market will always fluctuate, the fact that returns on houses have been relatively consistent over time prove their worthiness as sound investments.
If being a landlord is your thing then houses tend to carry more value as income properties. Ideally, you charge enough rent to cover your mortgage in addition to a possible profit. This also allows you to hang onto a retirement asset while you upgrade your living conditions.
While prices for detached homes in Toronto remain high, the difference compared to one bedroom condos is shrinking. Tighter mortgage rules, higher interest rates and foreign buyers taxes have cooled what was an overheated housing market by 10%. At the same time, condo prices rose 14%.
The GTA Condo Boom Continues
As Toronto grows, demand for housing has kept pace. This demand, combined with the inability of many buyers to purchase a detached home, has contributed to developers churning out more condo units. The condo market has been far less impacted by policies designed to cool housing prices, which has allowed prices to rise.
Why Buyers Should Keep Looking for a House
There is still hope if you are looking to buy a house. First, as mentioned above, tighter lending rules have somewhat stabilized prices. Second, in 2018, Canada’s Supreme Court ruled in favour of publicly listing sale prices in Toronto. Now, realtors must list the selling history of a property. Consumers will be able to see when and for how much a home was sold, and how often it has been on the market.
One result from this ruling has been the decline in bidding wars. Before the ruling, realtors would often list a home under its assessed value, fueling a bidding war that resulted in a final sale price far higher than the listed price. Now, buyers will have crucial information to make a sound financial decision, making them far less likely to overbid for a house.