Phil Gull

My son lives and works in Toronto and is contemplating buying his first property. He is single, has a good income, and I will help quite a bit with a deposit.

I am really worried by the ' condo bubble ' in Toronto and not sure if I should be worried by how hot the low end of the market is. Apparently multiple offers are common. ( I'm also staggered by how expensive the 'low end' is ! )
There is an intermediate category which is townhouses. As I understand it these are row houses which have some common areas and so have a maintenance fee like condos.

I would be interested in forum members view of the market generally and townhouses in particular.

Thanks for your help.

PD

Novocastrian

Hi,

In Toronto townhouses may be organized like condos but more commonly (especially in older neighbourhoods), they are bought & sold just like other houses. Personally I prefer the latter.

HTH

Auld Yin

Some townhouse developments are freehold, making the owner fully responsible for inside and outside of his/her unit. He/she owns the land on which the unit stands. There are condo fees for the common elements such as access road, playground/pool etc. The owner has freedom to do many external changes not permitted in other type of developments.
The non-freehold townhouse units are basically owned by every owner in the development with each owner being accorded a percentage ownership based on unit size. The condo fees in this case would cover common elements such as roofing/windows, gardening and snow removal. Basically the owner is not permitted to do anything to the outside without permission.
Both forms allow easy purchase and sale.
Many developments/units are extremely well appointed and can be quite expensive. At the beginning townhouses were a stepping stone to single family homes but the advent of fancier units in desirable locations some people are turning to them in later life to eliminate the gardening/snow removal issues but still providing front and back doors.
There is no indication the condo bubble will burst. The Toronto market has been vibrant for years now.

London Mike

I wouldn't worry about a condo bubble. They just can't stop building them fast enough. With the prices they're at these are snapped up a lot by investors, but at any case supply/demand issues in the city will mean no great correction at the low to intermediate end of the real estate market anyway.

While interest rates are low even townhouses will not suffer greatly, but that might change when IR rise -as they will do. People seem to foolish enough to extend themselves against 4 year fixed mortgages at ridiculous levels to be near the city centre where transit is more accessible. I guess the view is that 4 years down the line these properties will be investments to sell on and they can move elsewhere comfortably but that's a risk in my view.

FlyingDutchman6666

Robert J. Shiller, a well-known Yale economist, suggested
— a bit whimsically — that bubbles could be diagnosed using the same
methodology psychologists use to diagnose mental illness.

The solution: a checklist like psychologists use to determine if
someone is suffering from, say, depression. So here is Mr. Shiller’s
checklist.

- Sharp increases in the price of an asset like real estate or dot-com shares
- Great public excitement about said increases
- An accompanying media frenzy
- Stories of people earning a lot of money, causing envy among people who aren’t
- Growing interest in the asset class among the general public
- “New era” theories to justify unprecedented price increases
- A decline in lending standards

If your asset class is suffering from these symptoms, consult your
neighborhood economist or licensed broker, and maybe a good
psychotherapist, too.

Phil Gull

Thanks, folks, for the comments. He has decided that he wants to try something different from the condo type lifestyle and so will only be looking at freehold properties.

mandymoochops

I think as long as he finds a place he wants to live in for the forseeable future, then he shouldn't worry. I know it won't be his forever home, but unless he's gong to be flipping a property / or taking on a massive mortgage way above his means he shouldn't worry about a property bubble.