A Cautionary Note on buying a New Condominium
Buying new holds a great appeal to many. Think of being the first person to own a home and all the excitement in being that first owner who gets to choose everything! In resale housing, we always hear; ‘if only the kitchen was white, then, this would be perfect!’, ‘Why do you think they picked this tile? I hate pink’, ‘no tub? But, I love my bath!’. Beyond the finished choices though, there are considerations for the first and second buyer.
As many, many condominium apartments are bought ‘on spec’, you need to consider what the carrying costs will be once the condo is registered and all unknowns are known. Spec? Short for speculative, is a newly built project quite attractive to an investor buyer who is looking at turning over the home in a short period of time, often even before construction has been completed. At that stage, there are a few unknowns.
What will the condo fee be is a big one? What will the City assess the home for taxes? Are there any additional costs? Builders will put forth a budget and often will estimate monthly condo fees on, unfortunately the low side, to entice buyers. Both investor and buyers whose long term intent is to reside in the home. The project sells out, the project is built, which could take up to three years. At that point, consider how the real estate market has performed in that time frame? We are used to the solid increases we have enjoyed and are continuing to enjoy in the GTA, so, predictably, the investment will have grown. This investor buyer now has made money, on paper mind you, but, the investment has grown as predicted and now he wishes to sell. The City has not yet assessed the home and the condo fees haven’t really levelled off yet as the project is still relatively new.
The second buyer, now buying a resale may be in for a bit of a surprise as the taxes are not known and the property management are now predicting a healthy increase in the fees due to under estimations. Yikes. Many second buyers are still in that excitement mode of owning a home so new that they don’t really know all this until their lawyer reviews the condo paperwork and the reality hits. What will the taxes be? The MLS Listing says $1.00 per annum? The condo fees are still reported low. Will they stay this way? All workarounds to selling, but, your realtor and your lawyer need to be on top of this.