When purchasing real estate as a condo investor looking for a suite that will rent successfully, there are many things to consider, such as a location that will attract renters, local and building amenities, quality, builder reputation, etc.

Investing can be a lucrative financial strategy when all these items are approached wisely. 

Perhaps just as important for investors to look at, or even more so, is timing.

In my most recent column (Riding out the Canadian real estate cycles), I outlined the various real estate cycles Canada experiences. Of course, investors seek to purchase when condominium prices are relatively low, but that scenario has changed over the past few years.

In 2017, new single-family homes experienced a price correction largely caused by the introduction of the foreign buyer’s tax, changes in market sentiment and then higher interest rates. This ushered in an increased demand for new condos, which offered relative affordability compared to single-family homes. The increased demand, however, paved the way for further upward pressure on pricing. 

What the condo market data shows

At Baker Real Estate Inc., we track statistics, and our analysis of MLS rental data reveals a notable increase in demand for newly constructed condo rental units this year compared to 2023.

We looked at the percentage of newly built condos units in the GTA that were listed and subsequently rented on MLS within the same half-year period. This metric increased across all regions of the GTA. In Toronto the increase from 53 per cent to 67 per cent was pronounced - a positive sign for investors and the industry at large.   

The most significant recent factor to impact new housing prices has been interest rates.

New home pricing began to dip considerably in early 2022 when the Bank of Canada started to increase its policy interest rate. As interest rates climbed, both new condo and new single-family pricing continued a downward trend.

There exists a large dollar gap between the single-family benchmark price and the condo apartment benchmark price. As affordability remains a top concern for buyers, condos continue to be the stronger offering from an affordability perspective. 

With broad inflationary pressures easing, on Sept. 4 the Bank of Canada reduced its policy rate by 25 basis points to 4.25 per cent, continuing its policy of balance sheet normalization. As inflation is down, the BoC is committed to restoring price stability for Canadians.

The next scheduled date for announcing the overnight rate target is Oct. 23. 

Lower interest rates mean lower carrying costs

As the interest rate continues to go down, which it is predicted to, it will reduce carrying costs and new condos will become even more financially appealing to both end users and investors. In addition, available inventory should begin to drop as unsold units are absorbed at a faster rate.

There are a lot of potential investors waiting on the sidelines for things to change. Based on historical trends, prices will begin to rise as inventory drops. Now is the time to buy before prices go up again. 

And let’s talk about rents. According to Zumper.com, a one-bedroom apartment in Toronto rents for $2,385 on average, with a two-bedroom coming in at $3,137 – and demand remains strong.

In many ways, investing in real estate is about location, location, location. Regardless of timing, condominium investors benefit from significant immigration in the GTA, creating robust overall demand and creating a massive market of potential renters. 

Fortunately for investors in the Greater Toronto Area, we are situated in one of the most desirable locations in North America, and even the world. According to a June 2024 release by Toronto Metropolitan University, Toronto was the fastest-growing metropolitan area in North America in 2023. Significant immigration last year played a major role in our population surge.

And why wouldn’t immigrants want to live here? We enjoy a high quality of life in relatively safe surroundings – something envied by people around the world.

Condominiums as long-term investments

The MLS HPI Composite Benchmark Price has trended upwards, increasing at a compound annual growth rate of approximately 6.7 per cent over the past 19 years. The condo benchmark price has increased at a slightly higher compound annual growth rate of approximately 6.8 per cent during this same period.

Despite some recent price dips attributed to multiple factors, the data strongly suggests that GTA home prices will continue to rise in the long run. 

And the long run is what investors count on. Cycles come and go, but real estate remains one of the best financial and/or lifestyle investments anyone can make.

We are a resilient industry. Even with all the varied considerations investors have to address, when it comes to buying a home or condominium, sooner is always better than later.