Toronto Condos Drinking From The Fire Hose

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I've been helping a friend look for somewhere to buy here in Toronto and have been really struck by the anomalous pricing of apartments (aka condos) vs. houses. It reminds me of what I saw in the UK in 2007/2008, so is relevant here. For example, we looked at this apartment, which is in a really grotty location:

Despite the photos, it was pretty crappy inside too with much less usable space than the description would indicate and no secure parking of any sort (just an outside spot in a totally thief friendly location). All for 480K CAD give or take - realtor thought it would easily fetch that based on selling another place in the same building last month.

Next, we looked at this place:

This is in a much better, although not particularly high end, location, was really nice inside, has around three times the usable space, a proper garage, more bedrooms and its own front door, yet is on for around 600K and, according to the realtor, will probably fetch around 580K.

So, better location, at least twice, more like three times, the size, but only 20% extra cash? I asked the realtor why this was and he said it's simple: he sells over half the condos he deals with sight-unseen to overseas buyers, mostly from Asia, and they don't want houses as they're a hassle to maintain and, in any case, their own expectation is that people live in condos, houses only being for the super-rich.

This is going to end in tears I think!

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What are the rents like over there?

That first one has:

Maintenance Fees : $581.35 Monthly

Rents are running at about 2% yield. I'd guess that place would go for around 2K per month including the condo fee. The thing to watch though is that the condo fee includes a bunch of stuff usually - some utilities, buildings insurance etc. The house I linked also has a fee of 100 per month for which common areas are maintained and cleared of snow but all the utilities and maintenance for the house itself are your own problem. I haven't done the calcs but, comparing like for like, I'd say that 581 for the condo is probably about equivalent to 100+utils+maintenance for the house so won't have much impact on the price difference. You do see condos with very high maintenance fees for one reason or another (expensive facilities on site, backlog of maintenance etc) and they tend to be a fair bit cheaper per square foot.

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2% yield on 480k so 9.6k rent, 7.2k maintenance (inc parking) and 7.2k utilities for your 2k a month?

I'm a renter there not a buyer.

Edit moved parking to maintenance

Edited by Democorruptcy

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