One thing I love about Real Estate is that every client has different needs and this allows me to look at new and interesting ways to serve my clients. A client that I have recently done some work for had one simple question: Should I buy a New Condo in Mississauga, or Resale? Where is my money going to work for me the most? Seems straight forward and I've heard agents give standard answers such as "depends on your preference" or "do you want to move in now or in two years", which is fine – however, I took it upon myself to take it one step further and do some…you know, RESEARCH so that I could answer his question. One of the biggest "misconceptions" is that new development is cheaper and that by the time you move into the Condo (or Home) that it is going to be worth more. This both true and false at the same time as you have to look at the whole picture. In the case for my Client, he was asking about New Condos and Resale Condos and what was the better option. In order to answer his question, I needed to take a look at what was available given a certain budget in the resale market, and then what was available in the New Condo market and compare the two. We know that for a newer Condo Development (such as the buildings at Absolute and Duke of York) sell for approximately $300-$350 per square foot. This means that any new development should be priced at around the same price in order for you to see any return by the time you move into the Condo – which could be anywhere from 6 months to 2 years from now. Given the Real Estate Appreciation of approximately 5% per year (the average across the Toronto Real Estate Board), that means that in 2 years, a property that costs $350 per square foot today, will be worth $385 per square foot in two years time. That will effectively be the "market price" for a newer Condo in and around the Square One area in two years from now given the average appreciation rate. Therefore, the "MARKET" price of the new developments NOW need to be such that, in two years time when Mississauga hits around $385-$425 per square foot, that you would have made some money on your investment. That means, you should be paying around $300-$350 per square foot for any new developments. I looked at 5 new developments and looked at their pricing, and then it was pretty obvious why they were struggling to sell their inventory. A couple of developments are going to be closing in the next few months and they still have a number of units left. Here is what I found: Chicago [Closing June 2010] : $425-$450 per square foot and closing this year. I think I'd rather invest in Toronto with those kinds of numbers, thank you very much. How long will it take for Mississauga to catch up to this kind of pricing? I didn't see anything in the development that made me jump out of my chair. Onyx [Closing December 2010] : $410-$435 per square foot Residences at Parkside Village [Closing December 2011]: $400-$430 per square foot. Grand Residences at Parkside Village [Closing Summer 2012]: $400-$430 per square foot Elle at Parkside Village [Closing Summer 2010]: $375-$400 per square foot Wide Suites [Closing December 2010]: Approx $350 per square foot. So what does this all mean? And should I buy a new condo in Mississauga? First of all, I am not bashing buying new – I love the new development market, however, looking at the numbers it's obvious why some of the sales centers have been open for a couple of years and still haven't sold out. There is a lot of benefit in buying a new condo, being the first owner for a unit gives a lot of pride and, if done correctly can be a terrific investment opportunity (check our our great blog about Buying New vs. Resale). Essentially, as an investment, you want to be paying TODAY'S prices for what you invest in TODAY and buy TOMORROW. In the case of the developments that I have studied, you are paying TOMMOROW'S prices for what you invest in TODAY and buy TOMORROW. This means that by the time you have moved into the property, it has not increased in value at all, but the rest of the market is just catching up to the price that you paid 2 years ago. I know a number of people purchased in the Absolute buildings 2-3 years before they were constructed, however, they paid what the property would have been worth by the time the buildings were built and not at the time they were purchased. This meant that those who needed to sell immediately ended up breaking even or LOSING money on what they had invested in 2-3 years prior. Rule #1 in Mississauga Real Estate, you should never lose money! I have worked with a number of people who have been very successful in buying new developments as investments and if it is something you are interested in, please don't hesitate to contact me and I will let you know some of the better developments to invest in. Image: by thinkpanama [link]
Mississauga’s real estate market has seen it’s fair share of media exposure – check out the video below and let us know your thoughts in the comments section!