21 Aug What is a Better Investment: a Condo or a House?
Even in today’s hot market, Canadian real estate is still seen as a great investment. If you’re in the market for a property for the first time, or if you’re thinking of buying a rental property, there’s a lot to consider: location, price, type of building… it can be a little overwhelming. Today, let’s focus on one specific question: what is a better investment – a condo or a house?
Condos – the typical entry point
A condo is usually one unit in a larger complex of residential units. The homeowner owns his or her individual unit, but the land and amenities are owned in common by all of the homeowners in the complex. The maintenance of all exterior spaces, structures and shared amenities are paid through condo fees, which are managed by the complex’s condo board.
Condos can be part of a high-rise building, complete with swimming pools, gyms and other great amenities, or simply an attached low-rise home, like a townhouse. There are a few drawbacks to buying a condo. Condo fees are somewhat out of the homeowner’s control. These fees can go up when major repairs need to be done to the building, or when the condo board decides to add new amenities to the complex.
MoneySense magazine recently published a great article on Buying a Condo in 2015. In their research, they found buying in most Canadian cities is still a good move if you plan on keeping it for at least five years. They also did a great job of dispelling popular myths about the condo market in Canada.
House – is freehold the way to go?
By choosing a house, whether it is a townhome, semi-detached or single family dwelling, you control your property. Maintenance and renovations are done only if you decide to do them, and the final budget is also your decision. You’ll need to pay property taxes, but you won’t have those pesky condo fees.
The financials to consider
The purchase price for condos is usually much less than similar units that are freehold (or “free from hold” meaning the homeowner owns the land and the building by him- or herself). For first-time home buyers in Canada’s biggest cities, it’s a great way to get into the housing market.
From an investment point-of-view, condos don’t tend to go up in value as quickly as freehold properties. According to this Globe and Mail research, in the last decade, condo resale value has gone up by 48 percent, versus 90 percent for homes in Canada’s four largest cities. That’s a huge loss for condo owners. Depending on location and fees, condos can also be more difficult to sell than a freehold property.
Although buying a house may be a better investment in most situations, it’s important to look at your specifics before making any decisions. If a condo is all you can currently afford in your city, it may make sense to take the plunge and upgrade to a home later on. To see if you can afford that condo or house, check out my instant application page, or contact me to discuss your options.