|
|
|
Condo Value Depreciation
- Thread starter Seesus
- Start date
ponyboy
Active Member
With all of the young people buying these small 1br condos, I expect supply to increase over the next few years because they will get married and want more space for families. Rather than rent out, I think a lot of these people will end up selling because the cash flow from renting will not exceed the costs. And this isn't even getting into possible interest rate increases when mortgages reset. Just my 2 cents of course, and I may be wrong.
Flux Capacitor
Active Member
A condo is not like a car. I have lived in the same condo for 6 years. I could sell it for 40 more than my purchase price.
MBS-Guru
Active Member
really depends.... older condos are less desirable and are sometimes almost impossible to move in the market due to abnormally high maintainence fees. Most of Toronto's condos are relatively new (less than 10 years) but once they get over 10 years, repairs start piling up, and maintainence hits > .70 cents psf then values will plummet. Just take a look at mls and you'll see a lot of older condos with high maintainence fees that are pretty cheap and that have been on the market for a long time. Sad to say but building styles change over time and very few condos have a timeless design that will look just as nice 20 twenty years from now.
TrickyRicky
Senior Member
Depreciation really depends on when you buy and when you plan to sell. Here are real representative figures for a couple of housing options over a long multi-cycle period in the Old City of Toronto using 1981 as a cost base:
Condo:
1981 value $42,000
2009 inflation adjusted value $95,800
2009 real value $130,000
House on average street:
1981 value $74,800
2009 inflation adjusted value $155,584
2009 real value $675,000
House on better street:
1981 value $170,000
2009 inflation adjusted value $353,600
2009 real value $975,000
So over almost 29 years the condo appreciated about 1% above inflation per year, the average house appreciated 5.2% and the better house appreciated 3.6%. Location and upkeep etc. are obvious factors but these numbers are fairly reflective. So it seems that over time a given condo can appreciate (in terms of value, we won't mention escalating condo fees). Note however that the unique demographics and period of city maturing that occured during this 29 year period likely means these numbers will shift down moving forward. I suspect more than 1 percent, which may put long-term condo appreciation in serious question.
Condo:
1981 value $42,000
2009 inflation adjusted value $95,800
2009 real value $130,000
House on average street:
1981 value $74,800
2009 inflation adjusted value $155,584
2009 real value $675,000
House on better street:
1981 value $170,000
2009 inflation adjusted value $353,600
2009 real value $975,000
So over almost 29 years the condo appreciated about 1% above inflation per year, the average house appreciated 5.2% and the better house appreciated 3.6%. Location and upkeep etc. are obvious factors but these numbers are fairly reflective. So it seems that over time a given condo can appreciate (in terms of value, we won't mention escalating condo fees). Note however that the unique demographics and period of city maturing that occured during this 29 year period likely means these numbers will shift down moving forward. I suspect more than 1 percent, which may put long-term condo appreciation in serious question.
Last edited:
Johnzz
Active Member
Are you sure the "average" Toronto condo today is worth $130,000? I'd place it closer to $250k-$300k.
AKS
Senior Member
I think 28 year old buildings aren't worth that much on average? Maybe the downtown ones have value but outside the core it might not. However the downtown ones would cost more as well.
asiancolossus
Active Member
I have a friend who bought a condo near Yonge and Bloor for around 230K about 9 years ago, they renovated it and its about 1400 square feet (you don't get that kind of size these days with the new buildings). He claims it is worth 600K! I can see 400 per square foot in downtown easy but wonder if buyers are more interesting in larger older places or newer smaller places now and how that factors into pricing.
AKS
Senior Member
Yonge and Bloor is an expensive area so it will appreciate in price. Y&B is part of downtown. I can't speak for others, but I prefer newer buildings and less space. It's because maintenance is usually lower. The older the building gets, the higher the maintenance. Designs are also better in newer buildings like German appliances, marble counters, etc. Also some are 9' ceilings. It has a newer feel to it too. The floor to ceiling windows are nice to get sun in.
cdr108
Senior Member
those same floor-to-ceiling windows will also contribute to higher utility costs.
aren't some of the maintenance fees supposed to be banked in a reserve fund for ongoing renos/updates? that would be the time for the condo to be retro-fitted with energy saver equipment, etc.
interior finishes such as appliances, counter tops are easily replaced and cheap when you compare the $150 -200 PSF gap between new and older buildings.
AKS
Senior Member
Well, newer buildings are suppose to be LEED so that should save energy and decrease maintenance? As for the reserve fund, it would depend how much is in the reserve fund and how it's managed. If there isn't enough, you can upgrade so much or else the current residents gets a major hike in their maintenance costs. Anyhow, it would also depend how it looks like. Some look like commie blocks. Older buildings don't have amenities so that might keep maintenance slightly lower but you also don't have facilities.
TrickyRicky
Senior Member
Johnzz,
Those are not average Toronto prices, they are representative examples of the history of 3 individual properties at average locations in the Old City of Toronto. Of course some properties will do better, some worse.
In order to gain a long-term understanding of how the market behaves you have to look both at city averages and the history of a basket of representative properties. Averages alone do not give you a clear picture of what is going on. My point in posting those three samples was to suggest that yes condos can appreciate in value over time but that in general they lag other housing types in their inflation adjusted appreciation. People, especially those of us who only have this post-1990's recession boom as part of our personal experiences have a skewed sense of how property markets behave and how condos fit into this landscape.
Those are not average Toronto prices, they are representative examples of the history of 3 individual properties at average locations in the Old City of Toronto. Of course some properties will do better, some worse.
In order to gain a long-term understanding of how the market behaves you have to look both at city averages and the history of a basket of representative properties. Averages alone do not give you a clear picture of what is going on. My point in posting those three samples was to suggest that yes condos can appreciate in value over time but that in general they lag other housing types in their inflation adjusted appreciation. People, especially those of us who only have this post-1990's recession boom as part of our personal experiences have a skewed sense of how property markets behave and how condos fit into this landscape.
Johnzz
Active Member
I believe the “condo†you’re using in this example probably has lagged other housing types over time. But the condos you’re comparing here, really just represent the typical cheap old apartment buildings of that era. Perhaps they represented the average condo 30 years ago, but today, condos represent something entirely different. I think it’s a bit misleading to categorize all multiple housing as one and the same.
Just look at Manhattan for example. The high quality apartment buildings built in the 1920’s (Rosario Candela, Emery Roth, etc…) have appreciated exponentially more then the cheap apartment housing built concurrently.
TrickyRicky
Senior Member
Johnzz,
Perhaps you are correct in that condos and their place in the imagination and overall housing market in the GTA are evolving and things will change moving forward. That said I don't think we can discount the example I presented as an important lesson history is providing for us.
In 1981 the condo in question was only a number of years old and is easily accessible to the subway. At $42,000 this represented 56% of the cost of the price of a good downtown single family home at the time costing $72,000. If we translate that into today's market that would be like talking about a condo today that is a few years old, has good access to transit and costs $378,000 in 2009. This is pretty much exactly what such a condo would cost in one of the new buildings we talk about on this forum. So you can see that the value ratio of old house to new condo is almost exactly the same today as it was 30 years ago. The difference however is that over the long term the condo struggles to retain it's inflation adjusted value while the house makes solid gains.
Perhaps you are correct in that condos and their place in the imagination and overall housing market in the GTA are evolving and things will change moving forward. That said I don't think we can discount the example I presented as an important lesson history is providing for us.
In 1981 the condo in question was only a number of years old and is easily accessible to the subway. At $42,000 this represented 56% of the cost of the price of a good downtown single family home at the time costing $72,000. If we translate that into today's market that would be like talking about a condo today that is a few years old, has good access to transit and costs $378,000 in 2009. This is pretty much exactly what such a condo would cost in one of the new buildings we talk about on this forum. So you can see that the value ratio of old house to new condo is almost exactly the same today as it was 30 years ago. The difference however is that over the long term the condo struggles to retain it's inflation adjusted value while the house makes solid gains.