Since buying a condo is generally a household’s biggest expense, it goes without saying that both experienced and first time home buyers alike fear making a choice they are going to regret. One of the most intense sources of anxiety surrounding condo shopping has to do with the age of the properties available on the market. Should you go for an old condo or a brand new one? In order to make a sensible decision, here are three points to keep in mind.
1. Look at the affordability of condos across your city
If you look at the overall condo market of a given city, you may be stunned by the price differences that exist within a few square kilometres. Some parts of town can remain relatively accessible while others already are out of your price range.
Take Montreal for example: the average price of a condo located in the Centre area was as high as $462,165 at the end of 2011. In contrast, the average price for a similar condo in Montreal South West was $261,688, and brand new condo units are currently available from $237,000 at the District Griffin. Old condos in Montreal Centre are not even likely to match this price!
If you don’t mind ending up in a neighbourhood that is just a few subway stops outside the core of the city, buying a brand new condo can make a lot of sense; it will cost you much less and will probably not need any renovations in the near future. That could be a blessing when interest rates start rising again.
2. Look at market trends in different neighbourhoods
Some say the housing market has been acting like an ever-inflating balloon over the past few years. Figures actually support this metaphor: condo prices in Le Plateau, Montreal, have gone up by 41% over the course of the past five years (29% in the city as a whole).
As you might expect, the increase is more or less radical depending on the part of town you’re looking at, and you certainly can take advantage of this as a future condo owner. If you see that a given neighbourhood has recently been developing fast and is likely to become a prized one, you should consider buying a new condo there if prices are still reasonable. As a result, your property’s value could increase rapidly.
On the other hand, if new condos in the blossoming area you are longing for are already are out of price, avoid looking down on old condos! In fact, new property construction projects generally lift the value of old ones nearby. Therefore, if new condos are affordable in a vibrant area, go for them! If not, you are still better off buying an old condo in that same area instead of a new one in a deteriorating neighbourhood.
3. Keep a critical mind in the face of artificially low maintenance fees
Every month, unit owners pay fees to their condominium corporation in order to cover the expenses they share (i.e. watering the plants, cleaning the hallways, replacing the rooftop, etc.). When you buy a condo unit in a new building, these fees are likely to be relatively low. Huge maintenance projects should not be undertaken for a few years, thereby limiting the immediate need to withdraw big bucks from the common purse.
But as the building ages, important repairs will necessarily have to be made, and the reserve fund may turn out to be insufficient. That’s when serious increases occur! If the ad of a new condo building paints maintenance fees with glowing colours, do not take a leap of faith. Instead, take that extra step that will allow you to see what lies ahead.
As a future condo owner, you should avoid thinking short term. If it is true that the maintenance fees of older condos tend to be higher than those of brand new ones, it is only a matter of time before those new condo fees catch up. It’s not rational to opt for a new condo instead of an old one thinking that low maintenance fees will compensate for the higher mortgage.
About the author: Alexandre Duval is a blogger for District Griffin. He is also currently completing his master’s degree in political science at the University of Quebec in Montreal.