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| quote: | Originally posted by MarkT
"renting vs buying" and "condo vs. house" are topics on their own...suffice to say that some of the info here is misleading. rent is a tax credit and only reduces tax payable for relatively low income earners. IIRC, my provincial tax credits were consistently nil every year that I rented. my rent paid made zero difference.
IMHO, I wouldn't consider a primary residence (condo or house) as an 'investment' in the traditional sense. it's not that you won't see it gain/lose market value, or that it's not preferable to see your property appreciate vs. depreciate, but that it's not the same as buying stock at x price and selling at y.
obviously, a gain/loss is only realized when you sell. until then, it's a paper gain/loss. with a primary residence, it's not only unrealized until you sell, but unrealized until you sell and if you either exit the market entirely or buy again in another market that didn't experience the same level of appreciation.
Aaron gave a lot of good examples of what can be involved with a new construction. it can indeed be stressful and you need to determine if you can live with the potential drama in exchange for the pros that come with a brand new home that you were able to customize somewhat and be the first to occupy. there are clear benefits to be enjoyed.
one thing I would add is the builders can even make changes to room dimensions, if necessary. in theory, your 12x 10 bedroom could actually turn out to be 11 x 10 due to some unforeseen engineering/build requirement and you're shit outta luck with pretty much zero recourse. unusual? sure. but remember that you're buying a floorplan (that can change) with materials/finishes (that can change) with a tentative closing date (that WILL change, lol). new home warranty programs have less teeth than they ought to...so don't take too much solace in them either.
regarding appreciation, keep in mind though that most existing properties in the same market had similarly appreciated over the same time period of time too. whether you took possession then on an existing property or took position later on a new build is irrelevant in that regard. the more relevant stat might be whether new constructions prices appreciated to a greater extent than an equivalent resale property over that same time period.
what a new build does allow you to do is have your price set long before you have to incur the full expense required to acquire and maintain the asset. i.e. it eliminates the risk of price increases in the interim. but that is *not* to be confused with eliminating price risk, period...as an increase in value is not guaranteed. in theory, prices could have plateaued or even dropped in the interim (and in fact, that IS what happened in several areas of the country recently). you simply can't say with certainty where the market will be 2-3 years from now...though at the present time, it's quite reasonable to assume that Toronto home prices will continue to appreciate for the foreseeable future. still...there is risk.
a new construction also subjects you to mortgage interest rate risk. you know what mortgage rates are today if you close on a purchase now, but you do not know what they will be in 2-3 years when a new condo is built. virtually no mortgage lender will guarantee a rate beyond 12 months and the longest rate guarantee typically provided for current 'top' rates is anywhere from 30-120 days. with rates still at a relative low point and the likelihood is that they will be higher in the coming years, you're definitely taking on interest rate risk with a new construction vs closing on something now.
something that recently impacted people who took possession last year vs. a buying a condo that will closing years from now...the introduction of Toronto's municipal land transfer tax. previously, there was just the provincial LTT, but now there are both. thank you David f'n Miller.
what will impact people going forward if they choose a new construction vs buying now? HST (yes, there are thresholds, but it will still impact a significant portion of buyers in Toronto.
point ultimately being...you're taking on more than just the risk of 'drama' on inconvenience with a new build. |
do you work as a financial advisor? If yes, can I be your client?
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