Sometimes, it’s hard to predict what will happen in real estate markets. While considered very safe assets, making the right decision when purchasing property can affect you for years to come. Of the many different property types, condos have gained popularity and with the coronavirus pandemic coming to an end, it seems like pre-construction condos in Toronto will be the next great real estate investment.
GTA market overview
On average, home prices in the GTA have increased by 13.7% in the past year, but condo home prices have only increased by 8%. Due to a shortage in supply, real estate markets, in general, have turned into seller’s markets throughout Canada. In seller’s markets, home prices will often increase by exorbitant amounts to the point where they’re overinflated. This does not bode well for the future of the general GTA real estate market. On the other hand, the supply of condos disproportionately increased as post-secondary students and downtown employees moved to much cheaper locations where they can study and work remotely. While average condominium apartment rents decreased over the past year, there are strong signals that the condo market is already recovering. According to TREB’s condo market report, the number of rentals in Toronto increased by 81.6% from the last quarter of 2020, and the number of condo apartments listed increased by 78.8%. This means that there has been an unusually high number of high-quality condos that are undervalued.
Pre-Construction condos as investments
Pre-construction condos let you buy a condo unit before the building is built or traded on the open real estate market. It’s a great way to get a brand new property in the GTA housing market. Unlike buying an existing condo unit, pre-construction units are sold at today’s low condo market prices, but by the time it’s finished being built, the value of your unit can increase by quite a bit.
Pre-construction condos are a great investment opportunity as people slowly make the transition back to normal. This means that demand for properties will start to pick up again centered around the downtown GTA area. But pre-construction condos are poised to benefit from this even more since these new units are becoming more popular with younger residents.
Pre-Construction market conditions
Currently, the condo market is balanced between buyers and sellers. Even though demand has been severely reduced, there is a shortage of pre-construction condos due to lockdowns and construction restrictions. However, a balanced market is a much better opportunity for home buyers. As restrictions are lifted and people return to their normal lives, the demand for pre-construction condos will spike inflating prices and creating a seller’s market. That’s why it’s best to purchase a pre-construction unit now. By the time construction finishes, condo prices are projected to have surged in the downtown GTA area.
Earning money with your condo unit
But what if you don’t need a condo and you won’t need one for a while? Fortunately, pre-construction condos are real estate investments. Buying a pre-construction unit doesn’t mean you have to live in it. As soon as your unit becomes habitable, you can start renting it out to tenants. Pre-construction units are profitable because the regular demand for the Toronto rental market is very high. During the coronavirus pandemic and people moving away from downtown areas, the Toronto rental market is down by about 9% over the past year. However, since the cause of the decline is temporary, the rental market will almost certainly return to normal, which presents a large potential upside for condo unit owners. Toronto is known to have both high demand and high prices for rentals.
Currently, nearly all condo market indicators are pointing towards recovery. The condo market is still suffering from the effects of the coronavirus pandemic, but with stage 3 of the reopening approaching, things will eventually return to normal. By buying a pre-construction condo unit now, you’ll be well equipped for when the condo market surges. Fortunately, with a pre-construction condo unit, you can take advantage of today’s underpriced units and make a profit off of condo prices increasing soon.