Contrary to the catchphrase: location, location, location, savvy homebuyers looking to gain the most from their real estate investment know that location (while hugely important), is not the only factor that impacts the resale value of a home.
From the timing of selling a home to the age of the home, there are a slew of factors that influence how much your property will sell for, when you decide to put it on the market. Home type is among the most important factors.
With than in mind, we chose to answer the following question: How do resale values compare for a house versus a condo?
While lifestyle choices are instrumental in deciding whether you should buy a house or condo, for this post we focused on the investment side by looking at resale value.
House vs condo: How do resale values compare?
House advantages for resale value
Higher price appreciation
Apart from rare exceptions, house prices appreciate at a higher rate than condominium apartments.
According to RealNet’s latest report, prices of low-rise homes in the GTA (which include detached, semi-detached and townhouses) climbed up by 8% in 2014, compared to 4% for condos.
In Toronto, a key reason is supply. While the condo market is keeping pace with demands of buyers, thanks to record breaking number of new condo completions, the same can’t be said for houses.
With houses in tight supply, the market fails to address the demand of buyers eagerly in search of a single-family residence. This in turn, puts greater pressure on existing stock and drives up resale value faster for houses vs condos.
When looking at real estate overall, one main factor comes into play – land.
By buying a house, you not only own a home but more importantly, you own the actual plot of land the property sits on.
Owning land is the most lucrative part of your house purchase, because the demand for a plot of land will always increase. As the supply of land is fixed and demand is only set to go up, (thanks to urbanization and population growth), land proves to be a primary driver behind a higher resale value of a house. In a condo, you only share ownership in the common areas.
Opportunity to renovate your house, means higher resale value
In a house, you have complete and utter freedom to transform the space any way you wish – with the unbridled potential to grow your investment. Whether that means undertaking a kitchen redesign, installing a deck or even constructing a new addition to the house.
Undertaking home improvements doesn’t only enhance the design and livability of a house, but helps drive up the resale value, when it comes time to sell.
It’s important to choose the best home upgrades for resale properties to ensure that you get the highest return on investment. Typically, renovations made to the kitchen and bathrooms increase the home’s value the most.
Unlike houses, condos offer very few opportunities to increase the resale value through renovations. Apart from putting up a new coat of paint or installing light fixtures, by laws there are restrictions on the kind of changes that can be make to a condo suite.
Condo advantages for resale value
Keeping a condo in good condition is easier
A home in good condition will resonate better with buyers and is likely get snatched off the market quicker – overall, increasing its resale value. After all, who wants to move into a poorly maintained homes riddled with cracks and damages.
Under the helm of a condominium corporation, every aspect of the building maintenance is covered through condos fees, from electrical and piping repairs to garbage pickup and landscaping. By ensuring the building is well managed and in a top-notch condition, your investment and resale value remains strong.
When owning a house, the task of maintaining the condition of the property falls on the owner. Security, insulation and plumbing, along with lawn upkeep is the responsibility of the homeowner. Plus, houses are more prone to damages with an expensive and time-intensive fix, whereas in a condo, damages are taken care of stress free through condo fees.
Condo advantages – Renting
Rather than having to wait years for prices to appreciate, as an alternative option, it is easier for condo owners to rent out the suite in the short-term.
By renting out a condo suite, the condo owner has a steady flow of money coming in, and has the option to sell when the market is strong.
If the address of the condo is in an ideal location, this will attract renters. Ideal location being close to urban centres, grocery stores and transit. According to TREB, Toronto landlords earn an average of 23% more when renting condo apartments vs townhouses.
Condo advantages – A more affordable investment
In Toronto, the price gap between a condo and a house is the highest it has ever been, the difference among the two sits in the mid $200ks. In addition, the average price for a detached property in Toronto hovers just below the $1 million mark, which is why so many homebuyers are turning to condos.
As house prices become increasingly out of reach, condos prove to be the more affordable option for those keen on investing in real estate. In particular, it’s wise for first-time home buyers looking to make the leap from renting to opt for a condo because of their lower price points. This way, you’re still able to build your own equity with an affordable property.
While many will lean to one side of the logic, those in search of a clear-cut answer to the question “house vs condo: which is a better investment,” will not find an answer. To earn the most on your real estate investment and maximize the resale value, it’s best to speak with a professional Realtor® who can help you narrow down a property type, based on your personal budget and lifestyle choices that are relevant to you.
Source: The Red Pin, 02/20/2015