Investing in Pre-Construction Condos in 2023? Yes, please!

Today, more than ever, investing in a pre-construction Toronto condo may be the solution for you to complete your property portfolio.?

Pierre Carapetian of the Pierre Carapetian Group has stated that the current condo market in Toronto can set you up for peak profits. This sentiment is echoed by Michael Ji , one of the industries rising stars representing Masters Choice Group . Michael is focused on the pre-construction markets where he hosts a monthly bus tour that takes realtors and their clients to view the region’s hottest projects and properties.

The condo prices in Toronto, Downtown Toronto especially, are strong and are expected to keep this pattern in place. Specifically, the C01, C08, and E01 communities have seen a price jump of 31.7% over the past 3 years, 51.4% over the past 5 years, and an incredible 137.0% over the past 10 years. It is safe to say that price performance of condos has served investors very well. And investors like yourself will be the influencers that are the key drivers of this segment’s continued success. Investing in a Toronto condo, specifically a pre-construction condo, is a long-term investment. The current price trends in this area provide an interesting entry point and should offer potential investors some comfort as they embark on this journey.?

Statistics Canada shows that most of Ontario’s condos, built after 2016, are owned by investors – even outside major cities. Of these newly built or pre-construction condos across Ontario, 56.4% are owned by investors. In Toronto, the figure is very close to this, with 55.2% of these properties owned by investors. The number is smaller, but still significant in cities like Windsor, Brockville, and Ottawa, with investment ownership of 27.3%, 33.3%, and 39.2% respectively. The highest percentages in Ontario can be found in Norfolk and Woodstock, with 100% of the condos being owned by investors.?

Vancouver experienced the largest quarterly increase in condo prices in the first quarter of 2022, at 4.2%. Statistics Canada reports that this increase is likely to be due to high demand for condos but low supply – that’s where you can come in. Just last week, Better Dwelling stated that in 2020, half of British Columbia’s pre-construction condos were owned by investors.

While it is tempting for some to blame investors for the housing challenges that we face as a nation, the reality is that this group is essential to the efficient operation of the market. In fact, without investors the supply of rental units would be far beyond the critical levels that we see today. Why??

Because after introducing rent controls in BC in 1972 and Ontario in 1975, purpose-built rental construction has been discouraged and now represents a fraction of the total construction stock. Development lags far behind demand. Investors and developers have migrated to condos where they now focus their efforts. The joys of dealing with the Landlord and Tenant Board, made more complicated in Ontario in 2017 with the expansion of the rent control coverage, has further discouraged rental focused supply development. Most of the rental supply now comes from the investor financed condo market.

In 2023, Canada plans to accept 465,000 immigrants. This is relevant to you, as an investor. Not only will immigration stimulate the market, making your condo worth more, but renting your space to newcomers will generate profit to the community, especially in neighbourhoods that are developing. Torontonians need places already, and with new company joining us your place will look even more appealing. There is a mutual dependency here: your property investment offers space during a housing crisis, and you can make some money by being involved. Win-win.?

Investing in real estate properties in a city like Toronto provides an opportunity to get the market back where it needs to be. As we have seen from the number of condos owned by investors, condo developers heavily rely on investors to complete their projects. With demand currently exceeding supply by a landslide, reserving spots that can be saved for families who are struggling given the current state of the Toronto market offers some relief. This is not to say you are wasting your investment by driving prices down; its Toronto, demand will always be relatively high. Needless to say, you likely won’t walk away from this long-term investment empty-handed.?

How much can you actually make though? As we have seen, condo prices in downtown Toronto have skyrocketed 31.7% in the past 3 years. With pre-construction properties, you are bound to make even more on top of that.?

But why pre-construction condos specifically??

At this stage, many believe that property prices are at the lowest point they will be. As I mentioned, to complete their projects, condo developers rely on eager investors. You will be the first in line and therefore will benefit from early prices from hopeful developers. To put it bluntly, they need your money. Aside from getting the best possible value, you will also get the most returns. While markets will always fluctuate, the prices of pre-construction condos have fundamental support to go up from here. Finally, the property needs to be built. This will not happen overnight; you are possibly waiting a few years. This is a good thing for you, as you will not be required to pay a down payment in whole, but rather over the course of your waiting time.?

If you have the means to do so, pre-construction condo investments can be the investment of a lifetime. By contributing to the community and renting to Torontonians, buying pre-construction, and waiting out the process, there are lots of gains to go around.?