Price Gap Between Condos And Houses Largest In Years
CALGARY REAL ESTATE NEWS – For a lot of people buying homes for the first time, condominiums have been a way to transition from owning your own home to owning your dream home. However, an influx of upcoming condos and aggressive bidding battles for modern detached houses has led to an increasing gap between the rates of house and condo prices which hit the peak last year.
Comparing Housing and Condo Price
The average price gap in December between a one family house and a condo for sale in the market reached $320,000. Canada’s four main cities were affected by this which are Calgary, Toronto, Vancouver and Montreal. This is according to information from Brookfield RPS and Mail and The Globe. It has risen by more than double in the last decade since the average price for resale of a house in urban cities increased by 90% while condo price increased by only 48%.
Caption: Calgary Condos
This anomaly is clearest in Vancouver. Here, the average house rate for resale has increased to 120% from 2005 to $1.1 million, while the prices of condos have gone up by 50%. The gap is narrower, but expanding in markets such as Calgary and Toronto.
What is the Cause of This Large Gap?
The reasons are obvious. New listings supply for urban houses has followed a literally consistent downward spiral for many years. This was stated by Shaun Hildebrand, who is senior vice-president of Urbanation which is a firm specializing in condo research.
Video: Shaun Hildebrand discusses the future of the condo market with Rob Carrick, Globe and Mail Personal Finance Columnist
This has in part been caused by a shortage of homes which are newly built in urban areas and also due to the fact that available homeowners have been reluctant to sell in case nothing is available to purchase.
Also, there are the increasing numbers of new condo creations motivated largely by encouragement among policy formulators to enhance density and eliminate urban spread.
However, the gap in price has huge repercussions for both new purchases attempting to join the housing market without spending a lot and for cities straining to get the appropriate blend of cheap housing.
More and more, the gap in prices between condos portrays the fact that these two are attractive to totally different purchasers with condos owned by investors mostly serving the market for rental while young families bid up the rates of detached homes.
Caption: Luxury Condos
Calgary, which usually has had a lot of room to spread, has experienced the change to condo structures which have bachelor units without parking. You can find all available Calgary condos for sale to suit your preferences.
The accumulation of housing for rental has persuaded a lot of condo purchasers to rent instead, decreasing condos’ demands. According to Mr Hildebrand, this is because the pressure for venturing into the marketplace has eased as costs are now less to rent than to purchase.
Trends for Mortgages
In the meantime, the behavior of basement suites for rental has made it simpler for purchasers of homes to afford the huge mortgages on their homes and at the same time compete directly with condos on the market for rental.
In spite of an attraction towards congested city life, for a lot of Canadians, the perfect home is still the disconnected house. This is why the idea of missing a dream house has turned into something more emotional than missing a chance on a nice condo, states Cory Raven, the Managing Broker of RE/MAX Select Realty in Vancouver.
Caption: Corey Raven, Managing Broker of RE/MAX Vancouver
The chances of the same unit in the same building finally coming into the market are very high, while chances of getting a similar house which is renovated close to nice parks and schools is literally none.
Some officials in the industry claim the reduction in condo rates has been great for the market because it has eliminated speculative investors searching to purchase preconstruction units and then sell them a year after that for a large profit.
Today, investors for condos normally intend to make their money last for long on rental income instead of price increase.
Empire Communities executive vice-president Paul Golini Jr says they are fine with the prices in the market for condos, not increasing as quickly as low rise developments in Southern Ontario and high rise as well, as it provides some consistency in the marketplace.
Caption: High Rise Condos
Paul Golini Jr also added that if the condo prices rose greatly, the land would then be rising greatly. It is simple to be caught up in the vicious cycle of price rises.
In the haste to motivate urban increase, cities such as Toronto are currently straining to get the right blend of affordable houses to cater for a large surge of new residents from different countries or provinces.
Derek Burleton, the deputy chief of Toronto-Dominion Bank, states that one can naturally assume that a number of the policy benefits implemented have made us advance a lot in regard to the decreasing assortment of housing choices.
Derek is concerned that policy makers are concentrating excessively on development surrounding transit corridors, instead of creating a more compact transit system which may assist release new land with an enhanced blend of housing.
By motivating more projects for high-rise, cities have not essentially even able to stop suburban spread. In some instances, they have just pushed it away farther.
Fast Developing Areas in Canada
These are located almost an hour on the exterior of their respective urban centers of Vancouver and Toronto. Their growth has been at a rate which is quicker than the cities they cater to since young families venture further interior looking for detached homes which are affordable.
Mr. Golini states that a small catchphrase originated in the industry which states, ‘persist until you succeed.’ You venture further away from the city center until you come to the number which permits you to qualify for that rate.’
However, some people state things are changing slowly. Constructors are decreasing the development of high-rise condos and getting involved in developments for mid-rise and town-house also to build housing which is more affordable and conducive for the family housing in the urban center.
In January, alterations were done in the building code for Ontario. It legalized wooden frame buildings which are six-storey and are more affordable than steel and concrete and will also assist in blending of new low-rise housing which are more affordable.
In some instances, condo inhabitants are selecting to rise up in the market for condos instead of fighting wars for bidding for city houses. The demand for larger structures in Toronto is assisting to increase the price for units which have habitually been sold with a discount to new builds, states Mr. Hindebrand.
At Yonge and Eglinton, located at the center of Toronto’s upscale, Menkes Developments Ltd is constructing its initial project for condo targeting young families.
In the Eglinton, whose launch is planned for 2018, at least 10% of the units will be conducive for families consisting of three bedrooms and the building will also provide a reliable playroom for children.
Some purchasers are now viewing condos as a family home which is long-term instead of just a stopover while going to a detached house, states Alan Menkes, a developer. However, this trend is occurring slowly.
Alan states that they plan to attempt building more condominiums for families although the market will determine what they can build. He added that they do not want to build structures which are not popular in the market.
Even for homebuyers who are younger, the trend leading to moving into a condo has been very slow; signifying the gap between houses and condo is destined to expand in future.
Corey Raven states that a generation exists which finds it entirely normal to reside in a condo with no inclination to purchase a home. However, they have parents who they occasionally have dinner with on Sundays, who urge them to purchase a house.
More Information around the web:
- The Huffingtonpost Canada speaks on the issue of condo price gaps between detached homes.
- Business News Network shares insight on the condo market and houses.
- Mississauga Realtor Steve Moran shares his thoughts on the condo price gap between houses.
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