Skip to main content

Question: My boyfriend and I are hoping to move from renting to buying a condo. We don't mind renting, but prices are getting kind of crazy in Downtown Toronto and we figure now is the time to take the plunge for a condo. Do you think condo prices have bottomed out?

Answer: While I can't see into the future, nor would I try to speculate on whether condo prices have bottomed out (I'll leave that to the expert economists) – I do believe there may be a compelling case to buy if you can afford to do so.

It is very true that rents are getting pretty crazy these days, yet demand doesn't seem to be slowing down. Just earlier this week The Globe published an article about the increasing rent prices in Toronto.

Story continues below advertisement

Consider that the average one-bedroom rental in the second quarter of this year was approximately $1,600 a month in Toronto, and even more in the downtown core - $1,730. For a few hundred dollars more a month and a reasonable down payment, you could own a place for yourself.

And why wouldn't you?

Well, for one – many experts have been predicating a condo crash, but they have been doing so for the last 15 years! Suppose there is a crash, as a homeowner who intends to reside in the condo versus an investor who is looking at it solely from an economic perspective, you wouldn't be too adversely affected.

This is because most people will live in a home about 4 to 5 years, and assuming their monthly costs are fixed, they should be able to weather a dip in the market. Historically the housing market has been cyclical and it bounces back within that timeframe.

In the second quarter of 2013, the average condo price in Toronto proper (i.e. 416 area code) was $372,805.

Let's say you decide to buy something slightly above the Toronto average at $400,000 as an example. With today's mortgage offerings, you could hypothetically get a 5-year closed mortgage with a 25-year amortization for 3.5 per cent interest. Assuming you put the minimum 5 per cent down payment required, and factor in CMHC mortgage insurance, you would be paying about $1,955 a month.

Of course, the monthly figure above does not factor condo maintenance fees, which can vary widely among different buildings. I advise my clients to stick within the 50- to 70-cent per square foot range for maintenance. Also carefully consider what amenities you are paying for and if they provide value to your lifestyle.

Story continues below advertisement

One final factor to calculate into your costs of purchasing would be Land Transfer Tax (LTT). As a first time homebuyer you will be eligible for a rebate of up to $5,725 in the City of Toronto (only $2,000 for the rest of province due to double LTT in Toronto) . In the $400,000 example above, you will be paying $2,475 out of pocket after rebates.

The decision to continue to rent versus buying may not be so black and white. Careful analysis of your finances, particularly your ability to come up with a down payment will help guide you in the right direction.

Finally, asking yourself how your lifestyle may change in 3 to 5 years is of equal importance in the decision-making process: Will you outgrow your place? Are you planning on starting a family? Where will you be in your career?

These are just some of the questions you need to be asking yourself when making the decision whether to rent or own.

Ricky Chadha is a broker with Royal LePage Estate Realty in Toronto, and specializes in applying social media and other digital tools to the business of real estate. You can find Ricky on Twitter @your416 or at his website RickyChadha.com.

Submit your questions to realestateexpert@globeandmail.com. Our Real Estate Expert will answer select questions, which could appear on The Globe and Mail website. Your name will not be published if your question is chosen.

Story continues below advertisement

The content provided in The Globe and Mail's Ask a Real Estate Expert is for information purposes only and is neither intended to be relied upon nor to be a substitute for professional real estate advice.

Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

Cannabis pro newsletter
To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies