Your Guide to Luxury Condo Investing

| Investing

Over the past year or so, one of the biggest trends we saw within the real estate industry was buyers’ shift away from the downtown condo market and towards larger, more spacious single-family homes in lesser populated areas.

This shift was so widespread, in fact, that essentially everyone was talking about it — whether they worked in the real estate industry or not. However, those that do work in the real estate industry have a sixth sense when it comes to reasoning with mass-market trends like these and identifying their long-term ramifications.

That’s why downtown Toronto real estate specialists like myself didn’t overreact when everyone started selling their condos downtown. The market is always shifting and changing, so it was only a matter of time before the condo market bounced back. It’s a great time for luxury condo investing. Here’s a quick guide on what you need to know:

Why The Condo Market Fell

In any type of public market, when supply outweighs demand, prices drop. The same happens in the real estate market — when more homes are listed for sale than there are eager buyers, it can be challenging to sell a home even at its estimated market worth.

This is what happened to the downtown Toronto real estate market over the past 12 to 18 months, and was no doubt directly correlated to the COVID-19 pandemic.

Homeowners and residents of big cities were apprehensive about living near others in such close quarters during a global pandemic. Add onto that, homeowners now needed to spend much more time at home and began looking for properties with more liveable space.

Needless to say, condos downtown with smaller footprints didn’t quite fit the bill, causing their owners to rapidly list their biggest assets for sale in order to cash in and buy property elsewhere.

What Happened To The Properties?

When a vast amount downtown condo owners simultaneously decided to list their properties for sale at the same time, the market inventory skyrocketed. Because of this flood of new inventory on the condo market and without the same amount of interested buyers, condo units became harder to sell and their prices dropped.

As condo owners were very eager to get themselves (and their money) out of downtown Toronto during the nascent of the pandemic, they were willing to accept prices far below the true market value of their properties.

However, many condo owners weren’t able to sell their homes before fleeing the city, which resulted in an eerie ghost town vibe in many of the more popular buildings. Young couples or families were moving in with their parents or relatives elsewhere while their units downtown sat on the market depreciating in value over time.

While property prices are still somewhat low, now is a great time to think about investing in a luxury property. But before you make your mind up, here’s some related reading you can do ahead of time:

What Happened To The Luxury Market?

Whether their properties were worth $500,000 or $5 Million before 2020, every condo owner was affected the same way by the mass downtown exodus in Toronto. Just because properties were valued as luxury real estate to start off with didn’t exempt them from the downward market swing. And, in some cases, luxury properties saw even larger drops in value.

If some luxury condo homeowners had overextended themselves when they had originally bought their properties, these homeowners felt even more trapped when the pandemic hit as they were among the most reluctant to accept steep losses on their largest assets.

However, Toronto’s luxury condo market faced the same reality as the rest of the city — condo owners valued their personal health and safety over their properties. They cut their losses and decided to sell.

Worried about making a big investment in a luxury condo property right now? You’re not alone — but these investment-related blog posts can help alleviate your concerns.

Why It’s A Good Time To Invest

The old adage of “buy low, sell high” can certainly be applied to this particular scenario. It doesn’t take a degree in economics to know that investing when the market is low can reap great rewards when the market climbs up again.

However, if there’s one thing we’ve learned over the past year it’s that predicting the future can be a risky endeavour — especially when it comes to widespread COVID-19 trends. That being said, seeing as Toronto (and Canada, for that matter) has seen a sharp downturn in infection rates and active cases in recent months according to recent pandemic data, now may be the perfect time to make an investment.

In addition, those in the real estate industry have seen recent upward trends within the rental market. Whereas just a few months ago rent prices were at rock-bottom levels, they’re starting to climb once again.

What does this mean for investors? Not only is it getting easier to find renters as a landlord, but you can once again count on receiving rent from tenants that is closer to or more than your monthly mortgage costs. In investment terminology, that means that condos are starting to become cash-flow positive again.

Thinking of turning your next condo investment into an income property? Learn more about how to navigate the landlord life by reading my related blog posts here:

How To Make A Smart investment

Whether you live in Toronto full-time, you’re new to the city, or you’re solely looking to make an investment here, determining whether you’re about to make a smart investment in the local luxury market can be tricky.

Being able to predict market trends like when to invest in an up-and-coming neighbourhood or when to avoid investing in a peaking neighbourhood is just one aspect of investing. There are also important factors to consider, like who the condo developer is, the quality of the condo’s build team, which heat type a condo unit uses, what the property taxes and condo fees are, and many more.

Certain condo boards can create more problems than they solve. Avoid unnecessary drama at the board level with your next condo investment by watching out for these ​​5 Signs A Condo Board May Be Unhealthy.

All of these factors are important elements to consider when determining whether or not you’re making a good long-term investment in a condo. Even condos touted as ‘luxury’ can pose major red flags if you know what to look for. The last thing you want to do is spend a lot of money upfront with a view of growing your personal wealth in the long run only to see your new asset depreciate in value shortly after you invest.

The best way to make a smart investment is to hire the services of a knowledgeable, experienced professional that specializes in the downtown Toronto condo market.

Whether you’re looking to invest in a condo you plan on living in or renting out, I can help guide you towards making a smart, lucrative long-term investment decision. If you want to learn more about how I can help you, simply contact me here or read my page about investing in downtown properties here.

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