Toronto Condo Prices Hit Four-Year Low: A Buyer’s Opportunity

The average price of condominiums in the Toronto area has reached a four-year low, offering potential homebuyers an advantageous moment to enter the real estate market. As of September 2023, the average condo sale price stands at approximately $655,000, showing a slight increase from July’s $651,000. For first-time buyers who felt excluded from the post-pandemic housing boom, this downturn may represent a significant opportunity.

Despite this favorable pricing environment, experts caution that purchasing a condo comes with its own set of risks. Jared Gardner, a realtor with Re/Max, advises buyers to consider long-term ownership in their decision-making process. He recommends purchasing a property that buyers are comfortable holding for at least three to five years to mitigate potential losses in the near future. “There could be some really good buying opportunities out there,” he states, suggesting that slow sales and ample supply provide new buyers with numerous options.

Understanding Costs: Maintenance Fees and Financial Health

When considering a condo purchase, prospective buyers should carefully evaluate maintenance fees, which can vary significantly between buildings. These fees typically cover common area upkeep, but the extent of coverage can differ. Some buildings include utilities such as air conditioning, heating, and water, in addition to amenities like pools and fitness centers. Others may offer only limited services focused on common areas.

Gardner prefers a setup where utilities are billed separately, granting owners more control over their expenses. In contrast, James Frodyma from Sutton Group-Admiral Realty finds value in buildings with inclusive fees, especially those that provide a wider range of amenities. As he notes, older units often feature larger living spaces, accommodating growing households.

Real estate professionals recommend reviewing a building’s status certificate, which contains crucial financial information, including the size of the reserve fund. This fund is used for both planned and unanticipated repairs. Frodyma emphasizes the importance of assessing whether the reserve fund is adequate for upcoming repairs, as insufficient funds could lead to special assessments that would require owners to cover additional costs.

Additional Financial Considerations for Buyers

First-time buyers should also be mindful of the land transfer tax, which applies at both the provincial and municipal levels in Toronto. While some rebates are available for first-time homebuyers, Gardner highlights that tax amounts can vary significantly depending on the specific location within the Greater Toronto Area. Buyers need to calculate this tax based on the property’s purchase price before completing the transaction.

In a market where buyers have more leverage, Frodyma encourages prospective condo owners to include inspection clauses in their offers. This practice allows them to identify any potential issues, such as aging appliances, before finalizing the purchase. Other costs that buyers should anticipate include title insurance—protecting against title issues—and moving expenses.

Pre-approval for a mortgage is crucial, according to Stephanie Newlands from Heaps Estrin. She recommends that potential buyers engage with mortgage brokers early in the process to understand all associated costs, including property taxes.

Once a buyer secures their new unit, it is essential to consider ongoing financial responsibilities beyond the mortgage and maintenance fees. New homeowners should be prepared for situations that might require immediate repairs, such as appliance malfunctions or water leaks. Newlands advises setting aside a reserve fund for unexpected expenses, suggesting a range of $10,000 to $25,000 for the first year after purchasing a condo. This fund can serve as a personal safety net for unforeseen repairs and maintenance issues.

As the Toronto condo market continues to evolve, prospective buyers have a unique opportunity to navigate a landscape marked by reduced prices and increased inventory. By understanding the associated costs and potential risks, they can make informed decisions that align with their long-term financial goals.