September 11, 2017
Should You Pay More for a Condo on a Higher Floor?
A cursory glance at Toronto’s skyline is enough to tell you that the city’s condo boom shows no signs of slowing. And, while it’s well established that real estate in the GTA has dipped over the summer months, condos are proving to be the most resilient segment. Recent data from the Toronto Real Estate Board shows the average selling price for condominium apartments increased by 28.1 per cent in Q2 compared to the same period in 2016, with condos in the city now fetching an average of $566,513.
That’s a return that far exceeds most mutual funds or stocks, which is what has made condos such a popular investment choice in recent years. And while the Fair Housing Plan has sought to limit speculation in the market and has achieved some success, the returns on condos mean investors still see these properties as a valuable asset, especially in the pre-construction market.
Are Higher Storeys Worth Added Cost?
Despite the segment’s strong performance, slower market conditions mean investors still need to take a savvy approach when selecting a unit with good resale potential. For those mulling over an investment unit purchase in a Toronto or Hamilton condo, there are a few considerations to take into account.
One factor is where in the building the condo is located. Higher floors tend to demand a premium when purchased at the pre-construction stage, as a better view and added security are seen as amenities. However, these are features that quickly lose their value, explains Zoocasa sales agent Ricardo Rolo.
“I think the value in a higher floor is superficial,” he says. “For me, the extra value would only apply if you are planning on living there yourself. If you are looking at a return – if it is $10,000 extra for each floor you go up, in a resale you won’t get the return you need. I wouldn’t focus on getting a higher floor unless there was a view that meant you could get more rent.”
Only Premium Views Command a Premium Price
On the shores of Lake Ontario, Toronto residents can enjoy some spectacular views, but the best ones come at a price. In Rolo’s opinion, putting your money into a higher floor condo will only generate returns if it can generate high rents for the owner. A spectacular visage from the balcony would certainly assist that, as he explains.
“As an investment, the only return I can see that would be worth it is if you bought a penthouse,” he says. “Then you could do an executive rental or an Air B&B short-term rental. You know people will pay more for that.”
The issue with paying thousands of dollars extra as a pre-construction unit is that the same properties don’t hold their value on the resale market. For that reason, Polo advises against paying extra for a higher floor condo, unless you intend to live there yourself. For those thinking of a long-term home, there are obvious advantages to purchasing a condo that reaches for the clouds.
“One positive of being up higher, especially if you are downtown, you will have much less noise,” he says. “If you are close to a highway, then it would make sense to go higher for a condo. If you are on a higher floor like a penthouse, there will also be more restrictions on access. If it’s really high-end you might have your own elevator, but generally it’s just a special fob that will let you off on that floor.”