Many developers in Toronto prefer to rent out apartments rather than sell them
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GROWTH AMIDST CHEAPENING
As an expert notes on the pages of the publication Russian Toronto, land for construction is constantly becoming more expensive, the cost of materials and labor is also rising, municipalities increase fees month after month because infrastructure needs to be improved due to higher population density, and these costs are passed on to developers. Therefore, the increase in prices for apartments in homes from developers is an objective process.
However, a strange effect is now observed: apartments in condominiums on the secondary market are hardly rising in price, against the backdrop of a constant noticeable increase in prices for apartments in homes from developers. As a result, a significant gap is already visible between prices for apartments in condominiums on the secondary market, apartments in homes from developers, and detached houses. Moreover, the gap is such that sooner or later it should lead to a correction.
Against the backdrop of rising prices for detached houses, this type of real estate is becoming practically inaccessible to a large segment of buyers. For example, young professionals or immigrants without large reserves, and generally anyone who has no real estate investments or substantial savings. As a result, the only affordable sector for them remains condominiums, where prices are still relatively low. However, even here, the rise in prices for condominiums from developers significantly reduces the opportunities for such buyers – prices are already starting to move into a range that makes them unaffordable.
At the same time, the most affordable remain only apartments in condominiums on the secondary market, which sometimes cost one and a half times less than from the developer. Why their prices are not rising yet remains a mystery to me.
At the same time, the logic of market functioning persistently indicates that this will soon be the most sought-after type of real estate. Personally, I predict that in the foreseeable future, we should expect a one-time price jump for them. Therefore, apartments in condominiums on the secondary market, in my opinion, are currently the most profitable investment.
To this, the following trend should be added. Many developers are abandoning the condominium idea and, instead of selling apartments, are turning the building into rental housing. This is primarily driven by the profitability of renting out property due to increased prices. Another motive for such a decision is that the cost of new apartments goes beyond the affordability of many potential buyers, who are willing to rent rather than buy, and developers are adapting to this trend.
Against this background, purchasing apartments in condominiums on the secondary market looks even more attractive – both for those buying a home for their own living and for those buying an apartment to rent out.
Speaking of rental opportunities, the cost of renting housing in new 'income properties' arising from failed condominiums is usually higher than renting from an individual owner of a condominium apartment. Therefore, renters are more willing to rent from individual apartment owners, which makes investments in secondary market apartments extremely attractive.
Given the current situation and the further weakening of the Canadian dollar, one can expect with a high degree of confidence further growth in prices for detached houses. With condominiums, the situation is more complicated, but I predict that within the next year to a year and a half, a noticeable price jump for apartments on the secondary market should be expected. Overall, the market promises to remain active – provided that no global cataclysms occur.