Who’s Buying Condos?

Recent polls have proven what I’ve noticed for a while – that more and more Canadians are choosing condominiums for their homes. In some cities 35% of those polled said they were likely to purchase a condo, which is similar to my own client statistics.

So who’s looking for condos as their new home? Just about all walks of life are inclined to do so. First-time homebuyers are attracted to condos as a more affordable option that allows them to start building equity and to use that capital to move up into a single family home when the time comes. They often don’t have the expendable cash to spend on repairs and maintenance that comes with a freehold, like a new furnace in the middle of a cold February night.

Then there are the young professionals, men and women alike that need a maintenance-free property that allows them to pursue their favourite past times. Condos allow them time to relax or partake in sports and activities that would normally be spent mowing lawns, weeding, shovelling snow and repairing fences…and the list goes on! This demographic tends to need less room and is willing to live in the now.

We all know that Baby Boomers are a huge demographic in Canada and a lot of them are opting out of their big labour intensive homes and into condo-life. Many own multiple properties, including vacation homes that they like to frequently visit for extended periods of time. The luxury of leaving behind a home that will be protected and maintained without any effort on their part is very attractive, especially to “snowbirds“—Canadian retirees who winter in the Southern United States. Aging men, women and couples have also opted for homes that require less work so they can enjoy the comforts of retirement instead of continuously maintaining a large home.

As a realtor, I am always concerned about the potential resale value of the properties my clients purchase. Like condos, any property that has a growing buyer pool is likely to hold its value well.

Bedros Manikian is with CENTURY 21 Innovation Real Estate Agency in Montreal, QC.

Advantages of a Well Maintained Home

What are advantages of a well maintained home when selling?

  • Your home is more emotionally appealing in and out
  • You create a level playing field or advantage over competition
  • The home’s value is preserved, as inattention lead to costly repairs
  • Speaks of a safe and environmentally healthy home
  • Eliminates or lessens renegotiations due to deficiencies found
  • Results in a profitable net gain over time

What do maintenance, repairs and replacements cost?

Caulking windows, replacing a furnace filter, cleaning gutters and sealing an asphalt drive may only add up to a few hundred dollars a year and your time. At some point, replacing a new furnace, roof and central air can add up to thousands of dollars. Windows, kitchens and baths, flooring, and decorating eventually become worn and outdated, necessitating periodic and potentially costly remodeling.

Industry estimates on average annual cost over time

Industry estimates suggest that a homeowner should expect an average annual cost of 1% to 3% of the price paid for the home as a measure of anticipated cost for maintenance, repairs and replacements. A home’s age and condition at time of purchase can affect these averages.

How does overall maintenance and replacement affect value?

We certainly didn’t do an in depth study. For fun and as a small test, we looked at 8 mid-range homes, their initial price, the cost of maintenance over time, the homes age when purchased, length of ownership and selling price or appraised value. Here’s what we arrived at:

  • Homes new to 4 years old when purchased averaged an annual maintenance cost of $2,003 and 1.25% of initial purchase price. Their average length of ownership was 15 years and their average net gain in value after cost of maintenance was 3%.
  • A home 27 years old when purchased required updating and repairs. It had a length of ownership of 32 years and was 59 years old when sold. This home averaged maintenance and replacement costs of $2,891 per year or 8% of initial price and a net gain of 3.86% when sold.
  • Another home, 22 years old when purchased resulted in the following: Length of ownership was only 3 years, average annual maintenance/updating was $5,000 or 2.2% of initial price and net gain on sale was 3.2%.

The industry average of 1% to 3% annually for maintenance represents a good rule of thumb. As well, our little study produced a net gain of around 3% for average, mid-range homes.  

Eugen Pilato is with CENTURY 21 Today Realty Ltd. in Fort Erie, ON

Canadian Retail Sales, November 2010 Release

Date: January 21, 2010

Canadian Retail Sales, November 2010 Release

Source: Statistics Canada

Link to Release: http://www.statcan.gc.ca/daily-quotidien/110121/dq110121a-eng.htm

Summary: In November, Canadian retail sales jumped 1.3 per cent in both dollar and volume terms for the largest increase since March of 2010. While sales rose in 8 sub-sectors, the strongest increases came at motor vehicle and parts dealers, where the dollar value of sales increased by 2.7 per cent. Also notable was a 1.4 per cent increase in the dollar value of sales at gasoline stations, reflecting higher costs at the pump.

Analysis: Retail sales in Canada and Ontario continued to trend above the pre-recession peak. Improving labour market conditions and a generally positive economic outlook has prompted consumers to spend more on daily goods and services as well as large-ticket items like motor vehicles. This suggests that a growing number of households are confident in their economic situation moving forward, which bodes well for the housing market. If people are confident in their job and income prospects, they will be more willing to purchase and pay for a home over the long term, either as first-time buyers or home owners looking to change their housing situation.

Source: Toronto Real Estate Board