What are Caps and Levies? Caps and Levies refer to the development charges that will be paid the purchaser on a preconstruction condo unit. Without going in to all of them in detail the city requires the developer and purchasers to pay a portion of the infrastructure costs for building new buildings. These go to fund transit, education, libraries and schools and a are a major revenue source for the city. For more information you can visit the City of Toronto to learn more, but the key question as a purchaser is what will it cost you?
Levies are paid at the time of closing on the property. Since the levies in 2023 for example are not established today developers will often limit the purchaser’s exposure by “capping” them at specific prices to give purchasers a good idea of what their closing costs will be. Since the levies on a two bedroom are a higher than those on a one bedroom. Caps may be $6500 on a one a bedroom and $8500 on a two bedroom. As top agents, we are able to save our clients thousands by negotiating lower caps and we often do that before we sell you the unit. Your lawyer should be able to give you a better idea about caps on the unit.
Last week we saw vacancy rates in Toronto rise (ever so slightly!), which might mean that rental rates will likely level off (and perhaps even come down… ever so slightly). Hamilton makes headlines again as we see the city becoming more of a metropolitan area with new condos that are very popular for young individuals and first-time buyers looking for low-cost city living when compared to Toronto. And we have great news for variable mortgage holders with Bank of Canada maintaining its interest rate!
You may have heard some of the recent reports stating that a good chunk of Toronto Condos have a negative carry; meaning the inward cash flow on a property—the money received from rent—does not cover the cost of mortgage and condo fees at the end of each month.
If you know what you’re doing, negative carry is hardly a concern.