What are the benefits and risks of purchasing a condo?
Condominium apartments are typically the preferred starting home for singles, couples, and families alike. Condos are relatively cheaper than freehold, and the owner enjoys the use of the amenities offered, all being managed by the condominium board. They also provide an urban lifestyle by situating themselves near points of interest, such as shopping malls, restaurants, and business centers.
Lisa Patel, President of the Toronto Regional Real Estate Board (TRREB), states that “the demand for condominium apartments has remained very strong”. Lisa goes on to state, “the increase in supply, largely attributed to investor selling as both the traditional and short-term rental markets softened along with the looming possibility of a City of Toronto vacancy tax, resulted in much more choice and bargaining power for buyers and a moderate decline in average selling prices”.
As enticing as condominiums look, potential owners must ensure that they are informed about every financial aspect of purchasing a condo, including recent statistics, condo fees, rules and by-laws, and hidden closing costs.
Breakdown of Numbers and Figures
Firstly, understanding the statistics behind the condo market is key to knowing how, when, and where to best enter the market.
The following two charts show the trends through each quarter over the past 4 years for total condo sales and average condo price in the GTA with the exact values are detailed in the table. Please note that COVID-19 has affected the real estate market and should be taken into account when interpreting the following data.
As shown, after accounting for seasons and COVID-19, the demand for condos is still rising, as with the average price. Within the last 3 months of 2020, almost 4 billion dollars have changed hands just due to condominium transactions alone in the GTA, with more than 2.8 billion dollars coming from Toronto.
Read the full market reports for the past 4 years here.
What Goes into Monthly Fees
Every condominium building will charge different monthly maintenance fees, depending on services offered, location, age of the building, and other factors. These fees are non-negotiable and will need to be paid regardless of if the owner decides to use all the services provided. Here a non-exhaustive list of some things to expect to be paying for.
Common elements are frequently described as “any element that is not living space (i.e. individual units).” These may include amenities, parking lots and garages, lockers, balconies, lobby and reception areas, bike storages, maintenance rooms, garbage disposal and storage, hallways and walkways, elevators and lifts, automatic and manual doors, windows, storage areas, and green areas.
This also includes services for said common elements, such as maintaining, repairing, cleaning, disposing of, updating, upgrading, and landscaping.
A major component of monthly fees will be going towards the upkeep of any amenities that the condominium building offers. This can include meeting rooms, pools and saunas, exercise rooms, party rooms, game rooms, security and concierge services, property management, rooftop patios, barbecues, and tennis and squash courts.
Parking & Lockers
Depending on the condominium building, the unit may include a parking space and/or a locker. However, there are 2 other means for owners to use parking and lockers that are popular within condominiums:
Rent: Property owners may have the option to rent parking spaces and/or lockers from the condominium board and/or other property owners.
Exclusive Use: Property owners may have been given the right to use a common element parking space and/or locker for their exclusive use. There may also be instances where the balconies attached from the units are exclusive use and require prior approval from the condominium board for modifications.
Electricity (hydro), heat, and water are all necessary for day-to-day life, especially in the modern era. However, utilities may be included, partially included, or not at all in their monthly fees. A buyer who can estimate their utility usage may be much lower than the average user may be deterred by maintenance fees with included utilities, as the cost is not impacted by their usage.
Buyers must always ensure they know what utilities are included and what are extra.
Condominium Boards Rules & By-Laws
Not all considerations for purchasing a condo are strictly monetary. There is a board of managers and directors for each condominium corporation that manages most if not all aspects of the condominium. However, there are rules and by-laws that may restrict some uses of property or amenities by condo owners. The list below includes some of the restrictions that may be imposed on condo owners.
Pets: There may be a restriction on pets that limits them to certain sizes, breeds, and species. The condominium board may also deny all pets completely.
Unit Modifications: Some renovation plans may be denied by the condominium board, restricting the owner’s enjoyment of the property. Additionally, if the previous owner of the condo performed an unapproved modification to the unit, the condo board may require that the current owner remove the modification at their expense.
Amenities: In extenuating circumstances, there may be restrictions on the use of some amenities while still requiring the property owners to pay for the upkeep and maintenance.
Rent: The condo board may, in certain cases, deny a condo owner from renting their property to a tenant.
The amount shown is rarely the final amount required. Closing costs typically add 1% – 5% of the purchase price, sometimes reaching as high as 10%. This may include, but not limited to:
Land Transfer Taxes
Tarion Warranty Fee
Utility Deposits and Adjustments
Builder and Educational Levies
The buyer must always expect to pay more than what they offer and retain a buffer between the offer price and maximum budget.
Who Can Remember All This?
The team at BuyRealty.ca has the expertise and experience to handle every kind of condominium transaction. Our members have performed thousands of transactions and can navigate the pitfalls and loopholes that others may overlook. We also make sure that every transaction is unique and specialized to fit your specific wants and needs. We can protect your best interests while making sure you find the property of your dreams.
Click here to learn more about BuyRealty.ca and the members that realize their buyers’ potential.