If you have ever tried to rent or buy a 3-bedroom condo in downtown Toronto, you know what a rare unicorn these units are. So why is this?
It Starts with the Development Stage
The time it takes for a new Condo development to get off the ground; from pre-construction sales to building the condo project, to occupancy, and finally registration can be a minimum of 4 years. That can be a very long time for owners to wait, especially owners with families who would be in the market for a 3-bedroom condo. What someone wants in a condo now, can change greatly in 4 years. This means that instead of owners buying into New Developments, it’s most often Investors.
It's What Investors Want
Investors know that historically smaller units perform better than larger units in price appreciation. They also know that smaller units are easier to rent, and the returns are better. Therefore, they opt to buy smaller 1 Bedroom and Studio Condo Units.
It's Been Tried
The Water Club Condos on Queens Quay consist of three condo towers. In 2004, during the development phase, the first two towers were all smaller units. The third tower was supposed to be all larger, 3-Bedroom Condo units. However, the developer could not sell them at the pre-construction stage, so they had to do a redesign to make them smaller.
What we need to remember is that developers cannot build until they reach at least 70% pre-construction sales. If the units don’t sell, the building doesn’t get built.
What Do We Do?
So, what do you do if you are still determined to find a three-bedroom condo in Toronto? You have two choices:
- If you have a lot of money, you can buy a Penthouse. Builders always keep a few larger 3 Bedroom penthouses off the market until the building is in the Occupancy stage.
- Your other choice is to focus on older condo buildings. Those built before the 1989/90 market correction have larger units. This is because construction financing did not require all these pre-construction sales.
Unfortunately, for now, the Toronto 3-bedroom condo market is going to continue to be very tight until new legislation can keep up.
