Toronto Condos' Journal

Toronto Condo Consumers Benefit from a Renter’s Market
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More and more consumers are recognizing that at least for right now they are better off financially renting a condo than buying a condo in Toronto. This is certainly a departure from the past when most consumers realized that the best financial option would be to buy rather than rent so that their money would go toward creating equity in a condo in Toronto.

Today that is no longer the case; however. While condominium rents have continued to rise in many locations, consumers are still finding they are often able to rent condos for less money than what they would pay for a monthly mortgage payment on a comparable condo. In some cases, renters are able to save between 40% and 50% by renting instead of buying a condo in Toronto.

One of the reasons for this is that in some locations, property values rose quite steeply. Today, buyers who snatched up those condos without blinking have discovered they must now sell. The problem? They need to sell the condos at the prices at which they purchased them two years ago to recoup the balance they owe on the mortgage. Renters just are not willing to pay more money than a condo is worth.

Even renters who are able to qualify for mortgages just do not feel as though they are getting enough condo for their money, especially when they can often rent a comparable or even larger condo for less money.

As a result of the shifting market, many experts are quick to point out that today the market is no longer a seller’s market and it is not really a buyer’s market either. Instead, it has become more of a renter’s market.

Other renters are holding off on the idea of buying because they are concerned that prices have not yet hit the lowest point. They are primarily concerned that if they purchase a condo today it may not be worth the same amount just six months from now. They feel it is far more prudent to wait and see exactly where the housing market will land before they consider buying a condo. Other renters are concerned about the upcoming hurricane season. Few have forgotten the hurricane season of just two years ago that devastated many areas. Condoowners in those areas, especially those without insurance, have yet to recover.

While some areas are experiencing a deficit in supply of rental properties, in other areas condoowners have recognized the wisdom of holding off on selling their condos. They, too, are reluctant to sell their condos now when it seems more prudent to wait and see when the market will stabilize. To help make ends meet, many of these condoowners are willing to rent out their condos to the scores of renters lining up to take advantage of the opportunity. Even condos that are on the market for sale are also available for rent. While renters must accept the reality that the condo in which they are living must be available for showings, they still feel the trade-off is quite worth it.

Would-be investors who attempted to get in on the quick profit potential of flipping condos have also discovered that it makes more sense to rent out their properties right now instead of trying to selling them. In some cases, investors are discovering they simply do not have any other options when they must meet mortgage payments every month and are unable to sell their properties. In some cases, this means renting the properties at a loss, creating a negative cash flow.

In fact, this situation has become so much of a problem that landlords in certain niche markets are finding they must cut rents in order to create even a small amount of cash flow. These investors have quickly discovered that it is far better to rent right away at a loss than wait several months to try and attain the amount of rent they really need. Although landlords are often upside down on most of these properties, renting them out has proven to be the safest method; at least for now.