As a first-time homebuyer, you’ll find that many of your top real estate choices constitute townhouses and highrise condos.
That isn’t surprising.
According to the Toronto Real Estate Board (TREB), townhouses and highrise condos cost less to purchase than single family homes such as semi-detached and detached houses. And with mortgages more expensive to take out due to the Bank of Canada’s key interest rate increase in 2018, you’re obviously not working with as much financial room as new homebuyers of yesteryears.
However, selecting one over the other depends on your lifestyle and needs. Those factors will, in the end, make one a better investment than the other.
We can’t speak to your preferences, but we can offer insight about the advantages high rise condos and townhomes bring to the table and how they fare in the housing market.
So if any of that is going to tip your decision in one direction or the other, then keep reading!
Before continuing, we should note that townhouses are condos as well. You own the unit, but the communal areas belong to the condo corporation. Thus, the difference is actually between condo highrises (i.e., multi-story condo buildings) and condo townhouses.
There are freehold townhouses as well. Unlike condo townhouses, you own both the unit and the plot of land it occupies. While there are no maintenance fees, you are responsible for the maintenance and upkeep of the unit, and that includes roof repairs and snow removal.
They are also costlier to purchase than condo townhouses. This — along with your upkeep and maintenance obligations — make freehold homes similar to detached/semi-detached houses.
This comparison doesn’t include freehold townhouses, but only condo highrises and condo townhouses.
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Why Get a Highrise Condo?
In 2018, highrises cost comparatively less than semi-detached and detached homes. So like townhouses, they are a good option if you have a less flexible budget or higher mortgage rates.
Next, there’s no doubt that highrises take the edge in convenience.
As a condo owner, you don’t have to deal with snow removal, lawn care or other townhouse maintenance issues.
You also benefit from common amenities, such as a gym, swimming pool, common area, and party room.
The convenience and amenities make condos an excellent choice for working professionals, singles, and couples. Combined with the comparatively lower market price, it’s of no surprise that demand for condos is growing (source: Huffington Post).
Cons of Getting a Highrise Condo
Unfortunately, there are a few drawbacks to being a highrise condo owner.
Not only are high rise condos generally less spacious than townhouses, but your unit will share walls with other units from all sides, including the floor and ceiling.
In other words, you must be careful of causing too much noise and, if you end up with a not so ideal neighbour, noise from other units and the hallway. In some buildings, you might also have relatively frequent false fire alarms, a major inconvenience.
While they cost less than detached/semi-detached houses, highrises are can grow relatively expensive. The growth in demand is pushing prices north, but as a highrise owner you will also have to deal with monthly condo fees (which go towards building maintenance).
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Why Get a Condo Townhouse?
Townhouse owners enjoy several key advantages.
Like highrises, townhouses are generally more affordable than detached/semi-detached houses.
However, unlike most highrises, townhomes are also more spacious. You’ll often get big bigger bedrooms, more bathrooms, a larger living room, and, in some designs, even a basement.
These multi-level designs offer more room for storing your things and for your play.
Condo townhouses will also get maintenance services and common amenities. Some condo corporations will even handle snow removal.
The Drawbacks of Condo Townhouses
Unfortunately, space is still a premium in townhouses (albeit, less so than highrises).
Furthermore, as your townhouse is under a condominium corporation, you might be accountable to additional by-laws, rules, and monthly fees. In some corporations, you may not have a lot of control over how to manage or change the exterior of your home.
Highrise Condo vs. Townhouse Investment
There are two sides to ‘investing’:
- Investing in rental property
- Investing for profit via growing property value
Rental Property
Remember how we mentioned that the Bank of Canada’s key interest-rate increase pushed the cost of mortgages up?
Well, did you know that the Bank’s move may have also thrown 18% of the Millennial market and 22% (source: CBC) of Generation Z buyers out of the homeownership market too?
It’s not easy for today’s first-time homebuyers to enter the market, so it’s likely that the rental market will see more demand, at least in 2019.
In fact, it’s certain.
In 2018, highrise condo rental prices reached a “record-high” of $2,385 per month in the GTA. And the rent for townhouses isn’t far off either (source: Financial Post); starting at around $2,200 per month and reaching north of $3,000.
Be it a condo highrise or a townhouse, buying for the purpose of offering rent should bring in return on investment. In either case, your decision depends on your target market, location, target price point (to charge for rent) and other preferences.
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Highrise Condo vs. Townhouse Resale Value
This isn’t an easy metric.
Currently, the prices of both highrises and townhouses are expected to rise in 2019 (source: Huffington Post).
But that’s for now. We can’t forecast 5, 10 or 15 years into the future. Traditionally, townhomes have appreciated faster than highrises, but this wasn’t the case in 2018.
Was 2018 an exception? Or is the GTA experiencing certain trends that make highrise condos a better investment? It’s too early to say. In either case, banking on prices to increase so that you can sell it for a profit is a risk and, usually, a long-term bet.
Your property value can rise due to a variety of long-term factors. One of those is how well it’s maintained. We at ICC Property Management know what to do for making condominiums more desirable to potential tenants and property buyers. Request a FREE proposal today!
