Is it time for Torontonians to trade your condo for a house?
In the past year, detached home prices have flattened or drifted downward in Toronto while condo prices have surged so the price gap between the two has narrowed. At the end of this article we explain our belief that now may be the best time to trade in your condo or townhome for a detached home.
The market for detached homes
The benchmark price of a detached single-family home in Metro Toronto has dropped $60,000 from its peak in May 2017.
There are so many more houses for sale in Metro Toronto that the negotiating power has shifted in toward balanced market territory.
The market for condos
In the time-frame that house prices dropped $60,000, condo prices rose $40,000 and condos have had an amazing run with benchmark prices rising steadily over time.
A person who bought a condo in 2015 and sat at home watching TV would have made approximately $75,000 per year (tax free if it’s their principal residence). That's almost as much as the $78,373 median household income for a Metro Toronto (i.e., the median household has more than one income earner) .
The condo market is still pretty tight with the negotiation advantage sitting with the seller.
Can condo prices continue like this?
It seems possible that condo prices can continue rising at this pace. Sales are down compared to previous years but the condo market hasn’t contracted nearly as much as the house market. Having said that, price have dropped $20,000 since May 2018.
Rising interest rates and government intervention seem to be cooling the market and sales have dropped for both condos and houses over the past three years and this puts downward pressure on prices.
Time to trade-up
The gap between detached home and condo prices has narrowed as a result of dropping house prices and the tremendous condo price gains. A condo owner looking to upgrade to a detached home is in a better position today than they were one or two years ago.
Most forecasts for Toronto anticipate that detached homes will stay flat or drop in 2018 while condo prices are expected to continue to rally. Most economists also expect interest rates to rise another 1% by 2020 which will erode your borrowing power.
If you were planning the make a trade-up it would appear that 2018 is the best time to take advantage of the condo price rally because it isn’t guaranteed to continue beyond 2018.
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