Clay Jarvis
Nora Dunn
Beth Buczynski
For some people, buying a condo provides exactly what they need: a little space of their own that’s likely to appreciate in value. For others, a condo might be more of a necessity; a first foray into real estate ownership/homeownership that can be used to springboard to a larger property.
If you’re still deciding whether to continue renting, buy a condo or keep saving for a detached home, you’ll want to consider the unique lifestyle and financial choices condo buyers have to make.
Condo vs. house: Which should you buy?
Before wading too deep into the details of buying a condo, it’s worth deciding if you’d be happier owning your own condo unit than a detached house.
Space
The biggest difference between a condo and a house is typically the amount of space you’ll be occupying. Not only will you be living in fewer square feet than a typical detached home, but you could be sharing walls with other residents. You might also have to contend with hallway and balcony noise at various times of the day.
But if you’re already living in an apartment or sharing a house with roommates, you might be used to the sounds of other people. You might even like the feeling of having your neighbours nearby.
Maintenance demands
Owning a condo is a lot less work than owning a home. Exterior maintenance is typically taken care of by the building’s management. There’s no snow for you to shovel in the winter, no yard to maintain the rest of the year and no gutters to clean.
You may not have to do any of those chores when you own a condo, but you will have to pay for them in the form of maintenance fees, which will probably cost hundreds of dollars a month.
Your timeline
If you’re eager to get a foot on the property ladder but don’t have the down payment savings to secure financing for a detached home, a condo might be your best near-term option.
And depending on what your monthly mortgage payments wind up being, you might pay as much for your condo as you would spend on rent in some cities. Even if a condo isn’t your ideal property, building equity in one now might make more financial sense than paying rent to a landlord until you can afford a house.
But that’s only true if you’d be happy in a condo. You wouldn’t necessarily want to be six months into a five-year mortgage term, decide condo life isn’t for you and then break your mortgage in order to sell. That could cost you a small fortune in prepayment penalties.
Life plans
Where do you see yourself a few years from now? Will you be living alone or with a significant other? Will you have kids or a dog? Could other possible changes trigger a need for more space?
These are questions you’d ask yourself no matter what type of property you’re considering, but they’re particularly important when deciding on a condo purchase because you can’t expand a condo like you can a house.
Buying the right condo
If you’ve decided in favour of condo life, it’s time to start drilling down and finding the right unit in the right building. Doing so requires looking at several condo characteristics. Because things like location, price and size are elements common to all real estate purchases, we’ll look at those that are unique to condos.
Condo type
Condominium housing is a lot more than 500 square-foot boxes stacked into the sky. To be considered a condominium, a development really just has to be made up of a group of individually owned units.
That means you have plenty of properties to choose from, including:
- Low-rise and high rise condos.
- Mixed-use buildings with commercial elements.
- Lofts.
- Duplexes and triplexes.
- Townhouses and rowhouses.
In some developments, you may even be able to find single-family homes that fall under the definition of a condo. It all depends on the ownership structure.
One thing to check when looking at condo properties is whether or not they are considered “freehold”. If a condo or townhouse is freehold, that means you own the land it sits on. That’s not the case with typical condos.
Freehold properties in condo complexes are rare, but if you can find one, you shouldn’t have to pay maintenance fees.
Amenities
If you’re buying in a condo building, what do you want it to offer in addition to your actual unit?
Are you looking for security guards, gym facilities, a pool, parking or storage? Or maybe more modern touches like coworking spaces, outdoor gaming areas or content creation studios? If you’ll be occupying limited space, these extras could be important to your long-term happiness.
Just remember that the more you expect your building to provide, the more you’re likely to pay — either in the purchase price or the monthly maintenance fees.
New construction or resale?
Condos are being built at a decent rate across the country, which generally means ample choice when it comes to buying new construction. Buying a newly built unit has its advantages, like warranties that protect buyers against occasionally shoddy workmanship and the feeling of being a property’s first occupant.
Resales have their appeal, too. Depending on the city, older condo buildings may have snagged some of the best locations or been constructed when building was less expensive and less hurried. They may offer more space, too.
The tradeoff is that the maintenance fees in older condo buildings can be higher. And if an older building needs a major unforeseen repair, it could fall on the tenants to help pay for it.
Questions to ask before buying a condo
Assuming you have a general idea about the kind of condo you’d like to buy, there are still some important questions you’ll need answered before you move forward and put in an offer on a particular unit.
- What are the rules? Are pets allowed? Are short-term rentals permitted? What can and can’t you do on your balcony? Whatever you plan to do in your apartment, make sure it won’t run afoul of your condo committee.
- Who owns and manages the building? Ask your real estate agent for information about your building’s management and find out their reputation around making repairs, maintaining security and general building operations. Asking about the turnover rate can tell you a lot about how tenants and owners feel about a property, as well.
- How much money is in the condo’s reserve fund? A reserve fund is what a building’s owners tap to cover major repairs. If the reserve fund is dwindling, and a building needs a new roof or plumbing overhaul, individual owners can wind up footing the bill in what’s known as a “special assessment.”
- What’s the building’s history of special assessments and insurance claims? If special assessments and/or insurance claims are common at a building you’re looking at, you may want to look elsewhere.
Financing a condo purchase
A mortgage for a condo is very similar to a mortgage for any other type of house. The main difference is that your monthly maintenance fees are factored in when lenders determine how much money to loan you.
The minimum down payment requirements for condos are the same as they are for other properties:
- For condos worth less than $500,000: 5%.
- For condos priced between $500,000 and $999.999: 5% on the first $500,000 and 10% on the amount above.
- For condos priced $1 million or more: 20%.
Condo prices in Canada
According to a December 2021 report by Mustel Group and Sotheby’s International Realty Canada, 70% of Generation Z homebuyers said 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 one of the only ways around high prices. As you can tell by looking at the following data from the Canadian Real Estate Association, condos are still relatively affordable alternatives to detached homes in most Canadian cities, even after the COVID-19 real estate boom.
Average condo price, February 2023:
- Greater Vancouver: $775,467.
- Calgary: $286,000.
- Winnipeg: $253,174.
- Greater Toronto: $705,472.
Average detached price, February 2023:
- Greater Vancouver: $2,054,975.
- Calgary: $635,900.
- Winnipeg: $375,063.
- Greater Toronto: $1,439,735.
One condo owner’s story
In June 2021, urban planner Nicholas Kuhl, 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 fairly substantial improvement from the 70 km commute he had 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,” Kuhl says.
Kuhl bought his condo for $115,000. All-in, he says it 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.
With no lawn to mow or driveway to shovel, Kuhl is enjoying a maintenance-free life. It’s a lifestyle that comes with a price: condo fees. But detached homes come with their own, potentially less predictable maintenance costs.
Kuhl is thinking long-term when it comes to his condo, and plans to maximize its value by eventually turning it into an investment property.
“I’m probably going to live here for five years, but I’m going to hold onto it and rent it out,” he says. “I know there’s always going to be another person moving to the city who is going to need a place to land.”
Frequently asked questions about buying a condo
Condos have their advantages — affordability, interesting amenities, a variety of styles — but they can be small, charge high monthly maintenance fees and you’ll be sharing walls with neighbours whose behaviour you can’t control.
Like other types of property, condos appreciate in value, although at a slower pace than larger detached properties. They can generate strong revenue as either long- or short-term rental units. A condo’s profitability will depend on its price, maintenance fees and the cost of your mortgage.
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