Do condos appreciate in value?
Whether you're an owner-occupier or an absentee landlord, everyone wants the property they own to grow in value over time. In fact, the equity potential and stability of real estate is the primary reason that it's preferred to other asset classes. All property assets can and do appreciate in value, including detached houses, townhouses, and condos.
Different types of property face different challenges, however, with the rate of appreciation linked to the property itself along with external factors such as the location and wider market trends. While some condos appreciate at a slower rate than single-family homes, a good condo in a great location has amazing growth potential.
What factors influence appreciation?
The growth potential of a condo is subject to a lot of internal and external factors. From the condition of the property through to the condo building and surrounding neighborhood. From supply and demand in the local area through to domestic and international economic trends - there are lots of things to consider.
Property condition - The condition of the property is a vital concern if you want it to appreciate in value, both the individual unit and the condo building or complex. When buying, it's important to look for somewhere that's good value without settling for somewhere rundown. While buying a property in a state of disrepair and fixing it up can be a good strategy for a detached house, fix and flip projects don't apply to condos because you have no control over the exterior building.
Condo community - The surrounding condo community plays a big role in terms of long-term desirability and growth potential. Are the amenities likely to attract fresh buyers in the future? Does the condo board have a long-term vision for the future? It's important to remember that people who purchase condos are buying into a way of life, so try to think like a future potential buyer from the outset.
Neighborhood - Location is the most crucial factor in all real estate decisions, and the biggest influence on long-term growth potential. When analyzing localities, it's always a good idea to start at the center and work you way outwards, so start with the unit before looking into the building, the block, the neighborhood, the suburb, the city, and the region. The condos likely to experience the best growth are located in desirable areas with huge upside potential.
Supply and demand - Choosing a specific neighborhood can be a challenging task, with certain locations likely to shift in desirability and value over time. It's important to have a basic understanding of supply and demand and how this affects prices. While you want to buy somewhere that's affordable now, too many condos in the nearby area can lead to oversupply and lower prices in the future. Timing is everything, so you want to buy when the market is low and sell when it's high.
Exclusivity and niche appeal - If location is the biggest factor in real estate, then exclusivity is a very close second. This is particularly true for condos, where truly unique projects that cater to specific markets can be rare. For example, the last condo project in a popular block before planning laws change, a condo that caters to retirees in an aging community, or a condo catering to students right next to a university.
Condos can and do appreciate significantly in value - it happens all the time. While single-family homes appreciate faster in many situations, this is not necessarily the case. If you want to buy a condo and build equity over the duration of your mortgage, the best advice is to think about potential returns from the outset and make all of your decisions based on the needs of future buyers.