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Published April 28, 2022

Should Your First House Be a Condo?

Buying a condo may be a way to enter the market sooner — for less money — while enjoying an enhanced lifestyle, but consider extra fees and future plans before deciding.

Being a first-time home buyer is no easy proposition amid Canada’s soaring real estate prices. Though you may have imagined yourself the owner of a traditional detached dwelling, buying a condo may be a way to enter the market sooner — for less money — while enjoying an enhanced lifestyle.

Condo affordability

Mustel Group and Sotheby’s International Realty Canada recently took the temperature of the next generation of home buyers — Generation Z — and found that their preference isn’t condominiums. According to the December 2021 report, 70% said that they would buy a single-family home if budget were not a consideration.

But for many of today’s first-time home buyers, budget is the top consideration, and buying a condo may be a way around soaring prices.

Just take a look at the difference between average prices for a detached home and a condo apartment in three different cities, according to March 2022 data sourced from the Canadian Real Estate Association.

Average detached house price:

  • Edmonton: $503,711
  • Ottawa: $853,615
  • Greater Toronto Area: $1,697,396

Average condo apartment price:

  • Edmonton: $245,070
  • Ottawa: $497,405
  • Greater Toronto Area: $808,566

The condo lifestyle

In June 2021, Nicholas Kuhl, a 28 year-old urban planner, bought his first home, a condo, in Calgary. Kuhl is the brother of Christian Kuhl, a NerdWallet employee.

The condo is walking distance to Kuhl’s work; a stark contrast to the 70 km commute he endured when living in Southern Ontario. “Not only do I have restaurants, shops and a big park next door, I’m also so close to work.”

It’s also maintenance-free life with no backyard to maintain nor driveway to shovel. This helps with cash flow, says Kuhl, who says he also enjoys reduced gas costs and lower auto insurance premiums.

Of course, this lifestyle comes at a price in the form of condo fees, due monthly or annually. These non-negotiable fees may pay for utilities, upkeep of common areas and to support the condo’s reserve fund. Condo fees are calculated using the size of the unit, and can vary widely depending on location, age of the building and amenities. Because condo fees can be a significant added expense, lenders take them into account when home shoppers apply for a condo mortgage.

But freehold homes come with their own, potentially less predictable maintenance costs, points out Shant Kaltakjian, a managing partner and mortgage broker with Dominion Lending Centers. And in exchange for condo fees, you may gain access to perks that wouldn’t be included with a detached home, like a pool or gym.

Condos as an investment

“I’m probably going to live here for five years, but I’m going to hold onto it and rent it out, because I know there’s always going to be another person moving to the city who is going to need a place to land,” says Kuhl, who is currently saving for his next down payment.

Matt Emerson, a RE/MAX real estate broker in Toronto, says built-up equity plus market growth could allow condo residents to become real estate investors after a few years time. A condo owner could “refinance it, extract some equity, convert it into a rental, and then take that equity along with additional savings and buy the next family home,” he says.

What are the best markets for condos?

Despite enjoying lower average prices than detached homes, condos can still be extremely pricey in certain markets.

Average condo prices in the Greater Toronto and Greater Vancouver areas were over $800,000 in March 2022, according to CREA data, for example. But in Edmonton and Winnipeg, average condo prices were less than $300,000.

According to the RE/MAX 2021 Housing Affordability Report, 54% of Generation Z and Millennials would consider buying a home in a different neighbourhood or region as a way to enter the housing market. And the growing acceptance of remote work could make moving to less populated cities an increasingly attractive option.

For Kuhl, the move to Calgary was a huge cost saver.

Kuhl bought his condo for $115,000, and all-in, he says it still decreased his cost of living by almost 40% compared to renting. “That’s something I tell people in Ontario to try to convince them to move out here,” he says.

Condo vs. house: How to decide

Consider buying a condo if:

  • You’re eager to become a homeowner as soon as possible, but can’t afford the mortgage on a detached home.
  • You’re interested in a low-maintenance lifestyle that provides access to unique amenities.
  • You aren’t necessarily looking for your forever home, but rather a piece of real estate that could eventually become an investment property.
  • Your family size is relatively small, allowing you to feel comfortable in fewer square feet.

Consider buying a house if:

  • You’re OK with delaying your homeownership plans while bolstering your down payment fund or paying down debt.
  • Your desired lifestyle includes mowing the lawn, planting a garden or just not sharing a wall with neighbors.
  • You want to put down permanent roots in a community, and don’t think you’ll be up for moving again or turning your home into an income generating property.
  • You have a family, or plan to start one, and want lots of space to spread out.

About the Author

Nora Dunn
Nora Dunn

Nora Dunn is a former financial planner, and has been a digital nomad since 2006. On her site, TheProfessionalHobo.com, she decodes financially sustainable long-term travel. She's on FB and IG @theprofessionalhobo.

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