Thursday, October 13, 2011
You could try to cram all your stuff into a one-bedroom condo, or you could pay the same price and get more space. Single condo buyers are being encouraged to buy two-bedroom suites because while one-bedroom units increased in value at a rate of 24%, two-bedrooms increased by 31%.
By Jennifer Febbraro, National Post
Remember the not-so-good old days when a single woman would be cautioned against buying her own condo just in case Prince Charming came around? Today, that same buyer is being encouraged to purchase a two-bedroom condo, though not exactly for the same reasons.
"I may decide to go the route of getting married and having kids," says Netta Scalzo, a recent purchaser of a two-bedroom condo at the Station Condos right next to Wilson station, "but the real reason I bought was because it was cheaper than buying a one-bedroom downtown. So it was almost like getting the second bedroom for free!"
This fact hasn't been lost on Station developer, Brandy Lane Homes. Company president, David Hirsh, conducted a survey of his last project, Loggia at Queensway and Islington, to compare the appreciation in dollars over a three-year horizon between differently sized units. What he discovered came as no surprise; the one-bedroom units increased in value at a rate of 24%, but the two-bedrooms increased by 31%.
A similar study by RealNet, an information company that tracks Canadian real estate facts, confirms this price appreciation, though the study was conducted over a two-year period. RealNet president, George Carras, explains: "What you'll see is an overall trend in the GTA of a greater price increase on two-bedrooms. There's a 17% increase for one bedrooms and a 22% increase for two - that's a 5% difference, but it can mean thousands of dollars in extra investment return."
Mr. Carras says the advantages to pushing your finances for that initial purchase far outweigh the disadvantages: "From a value perspective, you can't deny that the two-bedroom unit is a better investment. Even if you don't necessarily need a two-bedroom, because the general size of condo units is shrinking [due to the increased costs of building], sometimes a two bedroom gives you the kind of square footage that a one bedroom gave you many years ago."
As for Mr. Hirsh's study, he had an ulterior motive - to be able to confidently market the two-bedroom units to buyers with the hard stats to back up his claims. "In our guts, we just knew it was going to be a better investment potential for a two-bedroom condo," Mr. Hirsh says. "So for Station, we crunched the numbers and visually laid out the figures so buyers could clearly understand their options."
A snazzy ad for Station condos, for example, breaks it down: "We checked out 10 one-bedroom suites at different downtown condos. We averaged the size and price and guess what? A two-bedroom, two-bath, 937-squarefoot suite at The Station is bigger and less expensive than a one-bedroom, one-bath, 598 sq. ft. condo downtown."
Another plus to the two-bedroom, Mr. Hirsh says, is that in over 70% of the two-bedroom suites at the Station, there are walkout balconies from both the living room and bedroom. On average, the balcony from the two-bedroom-plus-den boasts 140 sq. ft., so it's basically like getting another entire extra room added to your already spacious home.
But Station is not the only one using the two-bedroom deal as a marketing strategy. Ads for the Mercer feature a broad-maned lion lounging across a brown shag rug, as the headline reads "King Size Living at King and John." The Mercer also offers a financial incentive of $15,500 to purchasers of a two-bedroom condo. "That's essentially 30 months of us carrying the weight of that larger unit for them," says Stephen Price, president of Graywood Developments, developer of the Mercer. "It can mean a lot, especially for those who weren't intentionally coming in to purchase a larger unit. But sometimes when we break down the numbers for them, the logic is there and it's undeniable."
Mr. Price espouses an old adage when speaking of the two-bedroom condo purchase: "Have you heard this one before?" he laughs. "It's a bit of an oldie. We used to always say in the real estate business -buy your second home first." The principle, he explains, is that one should not just accommodate his or her current lifestyle needs, but rather anticipate what may lie ahead in the future. "When you add up all the transactional costs of upgrading in Toronto," Mr. Price says, "it just makes more financial sense to buy larger in the first place."
And it's a changing demographic of who exactly is attracted to the two-bedroom. "We're no longer just seeing empty nesters," Mr. Price says. "But siblings or friends banding together or a new couple anticipating a small family. In many cases, you'll even see parents and a college-age child." In the latter case, the student will occupy the suite during their university years, then relocate once they've found a job. A few productive years of collecting money from a renter later -the parents, now on the brink of retirement, will downsize from a family home into the condo. What's optimal for the parents is they've gotten in on the condo market early on, making the difficult transition even easier for an older couple.
While many new condo buyers often have a knee-jerk reaction to buy downtown, many are reprioritizing space over location. "Of course, I initially thought I want to live downtown," says Ms. Scalzo, a young schoolteacher. "But I couldn't imagine living in such cramped quarters. I opted for the two-bedroom a little farther away, but it's ideal for me." It also didn't hurt that as a regular TTC user, she was right next to Wilson station and especially close to some regular shopping stops, like Costco, Best Buy and Second Cup.
"Sure, you get the immediate gratification of urban vibrancy now if you buy downtown," Mr. Hirsh says. "But at the Station, just 20 minutes from downtown, urban vibrancy is coming. All it requires is a little patience, a little bit of vision."
For most buyers, given the kind of square footage they are getting in exchange, envisioning a great lifestyle in this neighbourhood becomes easypeasy. Sometimes, bigger really is better.
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