Rise of The Suburbs

Posted by Alex Wilson on Thursday, June 13th, 2019 at 9:00am.


Suburbs At The Forefront

With Toronto not only being voted the number 1 place in Canada to live, but the number 1 place for new Canadians to immigrate to, we’ve seen significant price increases in the downtown area. The shorter term rate of return may be lower, so where can we find opportunities with potential to see a greater jump over th shorter to medium term? The Toronto suburbs are the answer to that.

You may be wondering if we’re going to be looking at detached homes in this article rather than condos. This question can be answered with a simple fact: the spread between the value of the detached home and the condo is 139%. So, as you can see, there is a huge opportunity for appreciation with condos.

Why should you put suburban investment at the forefront of your radar? Let’s do the math with a side-by-side comparison of a unit in a new development in downtown Toronto and a unit in the phase 2 development of Oakville Condos by Minto.

The first, a 1 bedroom plus den condo with parking located in a new development built by Pemberton, a great builder with a long track record similar to Minto, going up at Portland and Richmond in the King West area. This unit is 665 square feet and is listed for $851,990. The parking spot is $79,000 and the lot itself is $779,990. The second, a 1 bedroom plus den with parking spot, same size, in the second Oakville development is listed at $447,990. The downtown location price is 90% more than the unit in Oakville. The next question is, am I getting 90% more rent in downtown Toronto? What’s the real difference between the two?

The expected rent for the 1 plus den on Portland and Richmond, and other units in the surrounding area, is $2,700 per month. The 1 plus den in the second phase of the Oakvillage development, as well as a similar new development in the Dundas and Trafalgar area, is renting for $2,050 per month. The downtown location is getting 32% more in rent than the condo in Oakville. You’re paying a premium to purchase downtown but not getting it back in rent which means that, if you want your money to worker harder for you, the actual cashflow numbers are much better in Oakville. That being said, downtown Toronto is your blue chip stock and I do recommend having some in your portfolio.

An Attractive Investment

With all the suburban areas in Toronto, such as Scarborough, Ajax, Whitby, Vaughn, Richmond Hill, Markham, Mississauga, etc, you may be wondering why the focus has been on Oakville as an investment opportunity. The 1 bedroom plus den with parking condo in the Minto Oakvillage project is under $700 per square foot whereas the other areas mentioned above could be over $800 per square foot. Not only are you investing in the number 1 voted place to live, but you’re getting it at a much lower price than some of the other suburban areas.

The average price of a detached home in Oakville is $1.322 million and the average price of a condo is $557,000. With such a massive difference of 139% between the value of a condo and the value of a detached property being at an all-time high, there is a lack of affordability on the housing side. Freehold properties have flat-lined and people can’t afford to buy houses now that the fair housing measures, tax implications, and stress test were put in place. This forced people to migrate into condos creating a jump in condo values.

The vacancy rate in the Halton region is at 0.6% versus downtown Toronto which stands at 0.7%. There is a scarcity of these properties and a lack of rental product in that area. With people focusing on condos, as they are much more affordable for the majority of the population living in and coming to Toronto, investing in the Oakville developments is the perfect opportunity to diversify your portfolio and create a positive cashflow.

Let’s Talk!

If you have any questions or are interested in investing in upcoming Oakville developments, please send me an email at contact@alexjwilson.com or you can give me a call/text me at (416) 996-5181.

I’m here to make your real estate dreams come true in helping you build generational wealth and financial freedom.

 

 

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