03 April 2011 ~ 0 Comments

Condo Buyers Beware??


Should we be concerned with the amount of new condo units being built in and around the GTA?? This is a question I get asked often in my day-to-day dealings with clients who are either buyers, sellers or investors.

Over the years I have sold hundreds of condos on behalf of  clients and personally I have lived in or owned for investment about a dozen more.  Although today some builders are getting more creative with floor plans, suite finishes and catchy condo names you can’t help be concerned with the rising cost of average square footage costs.

$650 per square foot and upwards is a scary trend happening throughout the GTA. While most of the projects commanding these prices are located in the downtown core few seem justified in doing so.

In my opinion novice investors, greedy real estate agents, aggressive and greedy developers are all adding to the rapid increase in values. Yes hard costs have risen over the past few years (land, cost of construction, etc.) but it seems the herd mentality is in full effect with yet-to-be built condo units getting snapped left front and centre!

To which I don’t fully understand. As an investor you would be hard pressed to find a unit today that comes close to making sense with regards to cash flow and overall return on investment. Rents have been stagnant while hard costs continue to rise. And this doesn’t include what part a rising  mortgage rate would add to the mix!

Builders are marketing hard to the end consumer now and enticing them with cash that once was used to compensate the real estate agent who brought the client in, held their hand through the ups and downs of the roller coaster ride know as purchasing new construction, as well as providing unbiased guidance on what constitutes a good floor plan and at what price. The fallout from this is yet to be seen but I can imagine that the naivete of a buyer thinking they are saving a few thousand dollars up front are going to get bitten hard in the back end when registration or resale time comes.

Developers are upping the anty by resorting back to offering BIG financial incentives to greedy agents who in turn help the builder rid themselves of their “hard to sell” inventory. You may have seen the emails being slammed at you by any agent out there claiming to be V.I.P. Yes get in now at GREAT prices (oh yeah forgot to tell you that in one of the hottest real estate markets ever how they must resort to this sale tactic) or you will miss out on the DEAL of the century!

And to the end user to which I almost became another one myself this past week. You are being priced out of what was once a reasonable alternative to aging homes that most first and second time buyers find themselves purchasing unless you are looking at $800,000 plus. Last week I was considering purchasing a new condo as I want to add to my outdoor space that my current condo doesn’t offer. A reasonable 1100 square feet, 2 bedroom, 2 bathroom with 300 sq.ft. of outdoor space and two parking spots for the tidy sum of $995,000. Oh yeah a 24 sq.ft locker as well. After a few sleepless nights I decided to pass…and stay put in my current abode.

Bottom line is there is much to be concerned with on the quickly becoming unaffordable condo market. At the first slight in the economic picture the investor/speculator will bolt faster than you can say…um-mm. Owner occupied bueyrs are already considering other options. Hopefully before it’s too late this impending crisis will work itself out.

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