Condo critical

Yes, I’m bullish on property investment: I’m in the market right now. But condos appear to be hitting a critical stage in the real estate cycle and I’m convinced a major correction is imminent.

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A dear friend of mine, who sold his East York bungalow to move into a swank downtown condo, is thinking of buying an investment condo.

This preliminary discussion came just after he learned that his partner of three years has already made $110,000 on a pre-construction condo (estimated date of completion sometime this year).  Now my friend is thinking of cashing in on the condo craze. And I’m a little worried.

Particularly when stories about condos in a state of disrepair are starting to pop up in the papers. (Apparently years of low fees have left one condo complex in Toronto’s northwest in a sorry state.)

But what worries me most —particularly for condos outside of any urban core — is that the value of the structures and the units seems to depreciate over time.

While not at all scientific, a quick scan on MLS (the realtor’s multiple listing service) shows more than 30 condo units in the Greater Toronto Area for under $125,000. Most of these units charge $500 or more in monthly maintenance, with some as high as $700 per month — these are units found in older high-rise buildings.

While I’m certainly bullish on property, I’m not as crazy about condos as an investment. Given that a major advantage of real estate investing is the appreciation of the asset, I just can’t see how these older properties are going to compete. Worse: I wonder what a glut of these older units will do to all the new buildings now entering the market?

2 comments on “Condo critical

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  2. Of course these critical times should be taken into account with immediate measures. You have to be careful while taking any imminent measures. The results should be well directed. Thank you for sharing this amazing article.

    Reply

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