How much should a cheap condo cost?
By Webmaster - Posted on February 13th, 2008
Just a question, forget about the market, think about your own finances. Based on that, how much should a cheap condo cost? Imagine the mortgage rate is 7%. What does that do to the cost? Imagine you were given that condo for free. How much would that still cost? Could you look after it?
So for Victoria or wherever you are, where is the point that the price has fallen so far you would think you were really getting a deal?
Would you be buying a bigger place, or just getting into the game?
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Well, it was only a matter of time. A simple search for apartments in the VREB area of the MLS found 1014 listings today. Condo glut - yes or no?
Happy Valentine's Day, by the way...
As a first time buyer, I would be looking for a 1 bedroom apartment, likely close to the downtown area. I can't imagine buying for more than $150,000 -- and this would have to be a really nice place. If I can rent a great 1-bedroom for $1000, then a condo I want to buy must be just as great for about the same monthly house payments (taxes, strata fees, mortgage, home insurance). I'd still have to really think about my decision to buy at $150,000 as there is always the extra hassles of my own repairs to appliances, possibilities of extra strata costs like a new roof, and the lack of freedom-of-movement. This is all based on an average mortage rate of 7% over the term of my mortgage. A lower interest rate would not change my view on this as I like to play it safe and assume an average of 7.
If I looked at a metric of 150 times rent to set my limit, I think for a well-kept two bedroom in a nice part of Fairfield near Cook St Village - $180,000 would be absolutely tops.
Funny thing is I remember when apartments in that neighbourhood sold for considerably less - only about 4 years ago. Prices just seem completely beyond that now, but I wonder who could pay those higher prices without other inflated equity to work with.
For a first time buyer, with a typical income, $150 - $200 thousand seems like a pretty solid limit. Hard to justify paying more than that, even with the income to do so - rents aren't that high, and unlike a house, when you buy an apartment you're really just buying a chance at future appreciation - its not like your experience is any different or better than the experience of your renting neighbour.
I was offered a 1 bedroom apartment in an old block just of Cook by Fairfield for $90,000 back in 2002 but the walls were like paper and the traffic roar was maddening. I can only imagine what that is worth now but even then as much as it seemed cheap I picked up that you couldn't make any noise at the slightest or "the committee" would come down on you.
I am fairly quiet but the threat of that in an ancient early 60's block with no elevator either wasn't worth the aggravation.
When a guy makes an average wage and has a decent downpayment and still can't pay less then the rent of the equivalent then Victoria is not worth it and will consider renting here and buying in the US in the next 2 years. Thats why having a larger downpayment then average is all about, to make your payment less then rent not the same or more then rent.
Hey VG, I remember 5 years ago when 1 bedrooms in the area would list for $120,000 and sit for six months. Hopefully the unfolding glut can take us back closer to those times again...
When I see the same condos listed for $400,000 I just shake my head.
If there were batchelors for sale for $100,000 I could afford them.