Are Condo Townhouses The New Entry Level “Family Home?”

You can make numbers say anything you want, and the big “number” last month was the average price of a detached Toronto freehold property heading north of $1 Million for the first time ever, at $1,040,018 in February.

Not every buyer is looking for a detached house, of course, although having said that, it’s getting harder and harder to find any single-family house in the central core for under $600,000.

What’s the alternative as we move forward?

In my opinion: it’s condo townhouses.  If you’re looking for a starter home and you’ve got a starter family, then start looking at condo towns…

CondoTownhouseSudbury

If you weren’t such an expert in Toronto real estate, and you didn’t immediately recognize the above photo as a condominium townhouse on Sudbury Street, you just might think that’s an actual house.

But if we’re simply judging a book by its cover, would you really discount the above property without knowing what it was?

What’s the difference between that, and, say – this:

East78th

Okay, well, I suppose architecture for one thing, not to mention charm.

But would you be able to tell, unequivocally, from looking at these townhouses on West 78th Street in Manhattan that these are freehold properties?

There’s no question that there is a major difference between a condominium townhouse and a freehold townhouse, but as prices continue to rise in Toronto, I have to think that condo townhouses will play more of a role for would-be home-buyers.

Two weeks ago, I went to check out a condo townhouse in the complex on Sudbury Street, just north of King Street.

It had been on the market for three hours, and I ran into two other sets of agents with their clients.

The main floor of the unit had a reasonably-sized living/dining/kitchen, and then there were two bedrooms at the back, both above-average in size, and the master had a huge walk-in closet.

The “downstairs” was the most impressive part about the unit, however.  This unit was split-level, so while you stepped up about 4-5 steps to get to the main living area, you stepped down 4-5 steps to get to the second level.  I wouldn’t call this a “basement” by any stretch, as the window is at eye length, and it’s a massive open space where you could comfortably seat eight people on a sectional couch, OR……..perhaps have a child’s plan room.

For $580,000, including a 2-car (tandem) garage that is accessible from that lower-level, the price is fantastic.

Show me an alternative in the form of a freehold property, and I’ll probably be looking at an MLS listing from 2006…

This, ladies and gentlemen, is a fantastic alternative for those who can’t afford a single-family dwelling, and depending on your lifestyle at the time of purchase, it might work out even better than the freehold house.

My first-time house buyers often lament, “We really love the downtown lifestyle, but we want to get into a house.”

A condo townhouse essentially allows you to both, by keeping the location downtown (think King West, for example), but moving away from high-rise, and into what feels like a “home.”

For many people, the hallmark signs of a “home” are staircases, and multiple levels of living, as well as the quaint, cozy, vibe of a red-brick, 3-storey dwelling, which most condominium townhouses are.  Sure, they’re all attached at the hip, and most family neighbourhoods are a good mix of detached, semi-detached, and row-houses, but you’re never going to find a true “house” in a condo, nor a condo in a house.

In a perfect world, every Torontonian would be able to afford a freehold property, but the “price floor” in the city continues to rise.  I used to tell people, “We probably won’t be able to find anything under $500,000.”  Then that became $550,000, and then $600,000.

Last year, I sold the following houses under $650,000:

1) $600,000 – 2-bed, 1-bath, rowhouse with no parking, on a side-street, in Beaches Triangle
2) $582,824 – 1-bed, 1-bath house with unfinished basement – good for one person, south of Danforth.
3) $641,813 – 3-bed, 1-bath, complete and utter gut-job that needed $150K, south of Danforth.
4) $530,000 – 1-bed, 2-bath, no basement, no parking, century-old Victorian that was bought as an income property, East Beaches.
5) $500,000 – 1-bed, 2-bath, split-level (built on a downslope), with parking.  South of Danforth
6) $616,000 – 2-bed, 1-bath, detached, with parking, Woodbine/Mortimer.

That’s all, folks!

I sold over thirty freehold properties last year, and only SIX were under $650,000.

Not only that, three of the six were glorified 1-bedroom houses that really just serve as condo alternatives.

So when I meet with would-be home-buyers today, I often tell them that they’re going to be hard-pressed to find what they want for under $650,000, because believe me – nobody comes to me and says, “We want a 1-bedroom house.”

Stop me if this has gone from being “honest and helpful” to “downright depressing,” but I’m sorry folks, you just can’t get a 3-bed, 3-bath house for $650,000 anymore, or at least not west of Victoria Park.

But this blog post is supposed to be uplifting, as I really, truly do believe we’re going to see a trend in the next couple years of would-be house buyers turning toward 2-bed, 2-bath condo townhouses as an alternative.

And you know what?  The prices are great.

Tonight, I showed a 2-bed (formerly 3-bed, but converted to one large master), 2-bath townhouse, corner unit, with parking, for $549,000, just northeast of King & Strachan.

If you’re a young couple with a baby, or with one on the way, this is an inexpensive and stress-free solution to the ever-increasing single-family housing market.

For one thing, it’s about $100,000 less than what the same idea might cost you in a freehold.

And before you complain about maintenance fees, let’s look into those.

$535 per month, and that includes your water and gas, but you pay your own electricity.  So what does it cost you for water and gas in a house, each and every month?  Maybe $200?  So yes, you pay an extra $300 “for nothing,” but you’ll never have to pay to fix your roof, leaky basement, replace your furnace, etc.  That’s what the $300 “for nothing” goes towards.

Now consider the property taxes here are about $2,000 per year LESS than a comparable freehold, and suddenly the monthly fees, and maintenance, might work in the favour of the condo.

Perhaps this conversation is ironic, given Monday’s blog post about living in a house versus living in a condo, but as I said at the onset, if we all had unlimited resources, we’d buy detached houses on 50 x 150 foot lots.  But that’s not the case, and it is never going to be.

I still live in a high-rise condominium, and at 35-years-old, I do plan on having my first child here.  My wife and I have talked about it, and while “raising a child in a house” sounds great, neither of us are ready to move on from the condo.  It suits our lifestyle, and helps us tremendously in our occupations, and it’s the right place, for now.

So I’m not saying you can’t have a child in a high-rise condo, but many of my first-time house-buyers come to me because they want to start a family, and they think that it just can’t be done in a high-rise condo.

To each, their own.

But if you don’t want to have a child in a high-rise condo, and you can’t afford $800,000 for what you “want” in a freehold house, then consider a condominium townhouse.

One thing is for certain: no more condo townhouses will ever be built downtown.

Do you think that if a developer had a half-acre of land at his disposal, he’d build a bunch of 3-storey brick townhouses, or a monster 70-storey condominium?

If you need help making a decision from our good friend “supply and demand,” then I think the sheer fact that no more condo townhouses will be built speaks volumes to how prices will appreciate as more and more people want a product that’s in lower and lower supply.

I have a young couple, expecting a child, who are looking at a condo townhouse as we speak, and they sent me the following “summary” of Pros & Cons tonight:

PROS:

  • Multi-Level layout with the traditional house “feel”
  • 2-bedroom, 2-bathroom floor plan with 2nd bedroom more than big enough for a nursery
  • Quiet street, leafy, tree-lined, with street parking if we need a second car or for parents
  • Red brick construction “like” a house
  • $150,000 cheaper than XX House (something they had also considered around $700K)
  • Lower taxes offset high(er) maintenance fees
  • Get to stay in King West and literally move three blocks
  • Zero maintenance and upkeep needed; spend more time with the babe
  • Rooftop terrace is “urban backyard”

CONS:

  • Not a house
  • Appreciation potential not as good as a house

And that’s it.

That’s the extent of their list.

I don’t disagree with any of what they wrote, and we have to remember that there are different priorities for everybody.

My clients are in their mid-20’s, and all their friends live downtown.  They briefly considered moving out of the city where they can find a larger house, and where they can get support from their parents, but that option was dismissed rather quickly.

I’m doing more and more showings on condo townhouses, and they’re becoming more and more in demand.  I’ve already lost in multiple offers twice this year alone too!

Three years from now, if the townhouse complexes on Shank, Canniff, Douro, and Sudbury are renamed “Babyville I, II, III and IV,” then you can say you heard it here first…

45 Comments

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  1. AT says:

    I think this is a great solution for anyone who is in their mid-late twenties or is married and have no kids. Atleast in my case (just married) I can see myself living here until my kids start going to school and for me that is still about 7-8 years away. That is a good amount of time. Major benefits I see by living in one of these townhouses, as David mentioned:
    – Be able to live in the core and still stay in budget
    – With more space I can entertain family and friends over
    And IMO I feel condo townhouses will have better appreciation that a condo unit. Just my opinion.

    1. hal says:

      ” anyone who is in their mid-late twenties” most of them can only afford a condo i think. stacked townhouse is not so cheap, at least half million.

  2. Confidential says:

    Well, at least if the housing market crashes or flattens for 3 years before heading lower – obviously – with the current sudden unemployment rise …. btw, to continue the whole year…. those little condo-towns shall not lose more than 100 thounsand…..

  3. BillyO says:

    True, they are making towns around Trinity Bellwoods and surrounding areas, but they are $900K+. The Liberty Village ones while crappier as you note, are not nearly as expensive

  4. R says:

    And BTW, you are 100% wrong in saying no new condo townhouses will be built. There are a few new ones on richmond east of strachan and a whole bunch around manning or Palmerston North of college just to name a few. And they aren’t the crappy pseudo suberbean stuff like the liberty village crap boxes.

  5. Meh says:

    Totally off topic … David, I’d love for you to write an article about passive aggressive, self sabotaging clients. Thanks in advance. 😉

  6. jimbo says:

    Why has everyone been saying Toronto crossed the million dollar threshold for the first time ever when detached houses were selling for around 1,012,000 last April?

    Also should people be as worried about reserves, and the condo board of the townhomes like in a high rise? Only negative I have heard is of the roof leaks in another unit and the water tracks to your condo, you can have a hard time getting the issue fixed. Not sure how true that is though.

  7. AndrewB says:

    To get a decent sized stacked town in the city, like say 2BR+, you’re still paying a pretty hefty price. Once you factor in maintenance fees, is it really that much cheaper for the stacked town vs. a freehold option?

  8. Kyle says:

    Personally, i’d trade off the downtown location and be willing to consider a bit of updating/expansion to get a freehold with more indoor and outdoor space, closer to family amenities like parks, schools, libraries, recreation centers, and of course other families with children:

    http://www.realtor.ca/propertyDetails.aspx?PropertyId=15430013
    http://www.realtor.ca/propertyDetails.aspx?PropertyId=15429935
    http://www.realtor.ca/propertyDetails.aspx?PropertyId=15424712

    1. GinaTO says:

      Fully agree. I live close to Edwin (the third property) and I found there was lots to do during my mat leave – at least three great parks close by to bring my son, a library branch, a community centre with baby and me fitness classes, retail for all my needs, plus the restaurants in these types of neighbourhoods tend to be family-friendly, so no problem taking your kiddo with you for a meal out. Besides, if you really want to go downtown, it’s 20 minutes by subway… it’s not like you’re way out.

    2. wendy says:

      have you looked into the schools for this area? demographic of this area is not exactly suitable to raise a proper kid…. these are all contributing factors to the low price

  9. Ted L says:

    Most of the parents who insist on living in King West or other trendy downtown neighbourhoods are in denial (at best). I should know because I was one of them. Being immersed in the “downtown lifestyle” isn’t important once reality hits and you have to think about good schools and safe neighbourhoods for your kids to grow up in. You suddenly realize that all of the money spent on having fun at and getting dolled up to go to the latest restaurants/bars/lounges would be better used towards a bigger mortgage in a more family-friendly neighbourhood. (After all $500 per month can now get you an extra $125,000 in mortgage.)
    And you also quickly realize that being close to school is more important that being close to the “downtown lifestyle”, because drop-off/pick-up of kids at school/daycare is a 5 days a week routine, as opposed to going out which is (generously) 1-2 times a week.

    1. Joe Q. says:

      “Generously” in your last statement being the understatement of the century!

      1. GinaTO says:

        ha ha! indeed. Even 1-2 a month qualifies as “generous”. 😉

        1. Joe Q. says:

          For us and many of our friends it’s basically once or twice a year. 😐

    2. Kyle says:

      I think the irony is this, parents that live in a neighbourhood surrounded by other families, can actually work out babysitting swap arrangements with other close by parents which allow them to go out more than if they lived right downtown.

      When our daughters was two, we became friends with the couple who lived two doors down who also had a son that was two. Some nights after the kids went to bed, they would go out on dates while i stayed home watching our kid and my wife stayed in their home to make sure their kid was ok. Other nights they would reciprocate. You can’t really do this when your townhouse neighbours are all single 20-somethings.

  10. Jay says:

    We bought our first house in 1998. That’s also the year we had our first child. We bought a 1200 sq. ft semi at Yonge and Lawrence. We lived there for 3 years and then upgraded to a larger detached home. That semi came up for sale again in 2014. I went to the open house. It still looks the same as when we sold it in 2001. Same bathrooms and kitchen, although both were somewhat dated already at the time. I was surprised to see that nothing had changed – well, nothing except for the price. We paid around $370,000. It sold for just under $1M!! I just feel terrible for young people trying to get into the market today…we thought it was unaffordable then, I can only imagine how today’s first time buyers feel.

    1. Appraiser says:

      @ Jay:

      I appreciate your sentiments, but the passage of time has a way of blurring critical financial implications. It’s also best to remember that market timing is crucial, especially in hindsight.

      In 1998, the prime rate in Canada averaged ~ 6.5%. Today it’s 2.85%. http://www.ratehub.ca/prime-mortgage-rate-history

      The Bank of Canada housing affordabilty index was ~ .270 in 1998 (near historical lows), and now sits at ~ .300.
      http://credit.bankofcanada.ca/financialconditions

      Hardly a game changer when taken into perspective.

      1. Jay says:

        I get what you’re saying, but still, it’s a lot easier to pay off a $300,000 mortgage than a $800,000 mortgage, even if the difference in interest rates renders the monthly payments in a similar range. The size of the loan is also directly related to my ability to get a good night’s sleep!

    2. wendy says:

      It’s been more than 10 years….. the increase is understandable…. just look at the price of gasoline… Lovely neighborhood though….

  11. Jay says:

    The problem with a lot of these THs is that they’re not located in particularly family friendly neighbourhoods. They’re fine with babies, but once the kids are of school age, most of the downtown neighbourhoods unfortunately don’t have great schools. And if you’re living in a condo or townhouse, one assumes that odds are you’re not paying the current $30,000/year for private school as there are probably better places to put your money!

    1. Joe Q. says:

      The downtown school issue is very neighbourhood-by-neighbourhood. Many of them have excellent EQAO scores (as far as those can be used as a measure of school quality). I believe the condo-townhouses in at King / Sudbury and King / Dufferin are in the Givins-Shaw or Alexander Muir school districts, and both of those are quite good. There are other pockets that are not so good.

      1. Kyle says:

        True the EQAO and Fraser scores are quite good, however the kids would probably pick up more street smarts on their walk home past CAMH and along West Queen West’s bar strip, then they would book smarts in class each day.

        1. Joe Q. says:

          Heh — very true. It’s a long walk from those neighbourhoods, and not a pretty one either.

  12. Jayne says:

    @ David (or to anyone who can answer) I know you avoid Scarborough, but I have several questions, What is your opinion on stacked townhouses? Do you know anything about Woodside Village at 42 Pinery Trail? An agent showed me a 3br 2ba, and said some units have gone into bidding wars. Is this true? I have never heard of bidding wars in Scarborough much less on townhouses. Google wasn’t very helpful when I search the builder’s name whom I never heard of (Eden Oak)

    1. pavlo says:

      Google Tarion’s Ontario Builder Directory, then search for Eden Oak Homes. You can see 10-year history of warranty claims (for what it’s worth, their record looks clean in earlier years, but was not good in 2014). Woodside Village appears to have been built in 2005. The builder directory also gives the name of Eden Oak’s subsidiary companies and the company president’s name (Romas Kartavicius), you could try googling them too.

  13. DavidP says:

    I think for the same price, the old condos dotted all around downtown with lots of square footage (but with the accompanying high maintenance fees) are the best value for a young family. Nothing like a walk-in pantry for those Costco diapers and laundry detergent.

  14. wendy says:

    its not exactly young family friendly. Lived in one for a while before. It’s just one room stacked on top of another, tonz of stairs…… Those located in King West are not exactly in a safe and good school district. hourly hotel in one corner and a hooker across the street! would you really want to raise your kid there? In addition, due to the multiple units, you are literally sharing every side of the wall with someone. You’ll hear a crying baby on one side while party music on the other….. For the same price, bigger condo units in mid town toronto would prob be a better choice.

  15. Lee says:

    Condo townhomes may be a great alternative for a young family who can’t afford a house in this market, they are really not “family” homes. If you have children, you need outdoor space, and you aren’t going to find it in these types of houses. We’ve been looking at townhomes and they have no backyards to speak of, and there are very few parks in the core (at least safe ones), so you end up having to go far afield to find a place for your children to play.

  16. Chroscklh says:

    I tend think is okay option for condo townhouse – if only what can afford, is great option. Nothing wrong with this. But I do think they disappoint in term of size. Many are ‘stack’ -guy on top have no back yard space. Buyer have vision or desire live house-like with the brick and walk-up (as the David point out) but in reality, is more like condo on 2 floor. With stair eat up 200 square feet. Also, condo board fill with busy-bodies still rule own existence and tell owner what do with house. So happy print off exotic animal policy and tape to Chroscklh door make give away snow leopard. Is no hurting anyone (except neighborhood cat, racoon and squirrel) – I move freehold house no more deal with this.

    1. Joe Q. says:

      Snow leopards too? Do they fight with your bears?

      1. Kyle says:

        This would be one of the very few times where my money would be on the bears 😉

        1. Chroscklh says:

          You wud be correct, bear is strong. Joe Q, I leave bear back home when I move this country. Bear passport very hard get without bribe and also I leave house there – my country have terrible rule for squater right – but loophole is if family bear remain, no one can claim.

    2. GinaTO says:

      I came here to say what Chroscklh said here – since most of them are stacked, even though you’re not in a high-rise, you still have people below you, or above you, and most probably on each side of you, which is what I was getting fed up with when we decided to sell the condo. And a lot of square footage is lost to stairs – more than in a freehold.

      On another note, I would like to borrow your snow leopard to deal with our neighbourhood cats, racoons and squirrels that eat our garden peppers and tomatoes.

      1. Chroscklh says:

        Happy to lend but he in sanctuary now (too many times interrogate about missing cat, child etc). I have rottweilers now – is best pet man. big and protect house but no try kill me like leopard or tiger

  17. T H says:

    I do agree that condo townhouses are a good option, but would argue that it’s still possible buy a good house in Toronto with that same budget if you’re patient. We bought in the summer of 2013 with the help of an amazing realtor and got a detached, 4 bedroom house in Bloor West Village for under $600K. Granted, it needed updates (knob and tube, new roof, conversion to gas from oil) but all of those hard changes cost less than $50K and we couldn’t be happier with our purchase now.

    1. Ahmed says:

      Renting versus byuing is a very personal decision. I have done both. For several years while in school and uncertain about where we might settle, we rented. The ability to move quickly is a big plus although at the end of the lease, you have nothing to show for the money spent. On the other hand, now that we are in a location and plan on being here for a while, we have purchased. The mortgage is a form of forced savings as the equity is increasing every month. Of course it would be nice to be mortgage free, but it will happen someday.

  18. DavidP says:

    At VU in St Lawrence Market, you’d be forgiven for thinking that the entire building is either young couples (a lot with babies) or retirees who’ve downsized and want to live within walking distance of the market.

  19. Amelia says:

    I’ve seen freehold developments in the E03. Certainly not downtown, but it would appear some developers are still building alternatives to high rises.

  20. Natrx says:

    Kids are the BIG factor. 1 kid in a condo, doable. But even then, it’ll feel alot smaller then you’ll ever realize. 2 kids. Even harder. But it’s definitely doable. You’d have to switch back to the old school mentality.

  21. Kyle says:

    I know its cliche, but the saying “kids grow up so fast” rings extra true when it comes to real estate choices. So many people who are just thinking of starting a family only look a couple years out and seek a home that’s perfect for a baby and compare it relative to the condo or apartment they’re currently living in – Is it way more space than we have? Where will the nursery go? Does it have a lot of stairs? But the reality is kids don’t stay babies for very long, they reach school age before you even know it. And once you get there, these townhouses may not seem like such a great option. Which really just makes them a stop gap from condo to freehold.

    Not everyone will agree, but to me the location of these townhomes are parent-friendly, but not really kid-friendly. Great shops, bars, restaurants and coffee shops and likely a short commute for the parents, but not exactly the type of streets that a kid can play ball-hockey or learn to ride a bike on, and it’s a busy walk from home to school. I think these are a good option for really young families who immediately need more space, but i suspect a lot of families will outgrow these sooner than they would a (albeit more expensive) freehold home, so there’s potentially the additional transaction costs of an extra move to consider.

    1. Chroscklh says:

      this excellent comment. bring much good words to discussion

    2. Joe Q. says:

      These are all good points. One thing about stacked-townhouse complexes is that they often are located in former industrial areas, and can be far from local schools. A 1-km walk to school gets old quickly, especially in the winter. Having fun bars and restaurants close by is great but most likely irrelevant to young families.

    3. jeff316 says:

      Exactly. Even in SFH sectors, the houses are either flips, old people moving on or families with running out of room as their second kid has outgrown their babydom. It’s tough with prices so high, but not everyone is purchasing strategically with a full house in mind.

  22. Joe Q. says:

    My experience with condo townhouses is extremely limited, but my perception was that finding 3BR condo townhouses was rare, and that few of them had any sort of backyard.

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