As we outlined a couple weeks ago, the numbers on pre-construction condos in Toronto makes investment sense. You’re buying a condo years in the future at today’s price. You get first pick at which unit you want. You may get additional upgrades as an added bonus. The list of benefits goes on and on. This week, we’ll be talking about pre-construction condos, but narrowing our focus a bit. We’ll be checking out one of the hottest Canadian markets: Toronto.

Pre-Construction Condos In Toronto: Finite Space in a World-Class City

As Mark Twain once advised, “Buy land, they’re not making it anymore.” This is especially true of the highly desirable downtown neighbourhoods of Toronto.

And, even though us Torontonians tend to brag about our city, most often it’s justified! In 2014, Toronto was voted by Forbes as the 10th most influential city in the world. Sweet vindication!

For real estate investors, it’s less abstract than city loyalty. It’s the simple principle of supply and demand: there is only so much room in the downtown area, and as the city continues to draw in people, the demand for living space will increase. The sooner you get your slice of the pie, the more profit you’ll make.

The bottom line for Toronto is that there is only so much desirable land, and developers are snatching it up quickly. This is no more true than Toronto’s Waterfront. The quicker you stake your claim on a finite asset, the more returns you will enjoy in the future. Simple as that.

Pre-Construction Condos In Toronto: Low Vacancy Rates

Low vacancy rates are a good sign for anyone who’s looking to buy an investment property. The lower the vacancy rate, the more competition there is for your condo. And that means higher rent prices and better tenants for you.

Canada’s national average is sitting at 3.3%, whereas Toronto’s vacancy rate is only 1.8%. But in the downtown core that is closer to just 1%!!! That’s less than half the Canadian average!

So when you buy pre-construction, you have the benefit of knowing that you have a 99% chance of finding a renter. TO put it into perspective; if you have 1,000 condos available for rent one month, that means all will rent but 10 condos. Those 10 condos are almost guaranteed to be old inventory in older buildings with no amentities. That’s as close to a guarantee in the investment world as you can get.

Pre-Construction Condos In Toronto: Rising Cost of Single Family Homes

As single family homes continue to become unaffordable, more people will be turning towards condo living.

In April, the Toronto Real Estate Board reported that the average price of a detached home has risen 18.9%. Semi-detached homes have skyrocketed even further – up 23.8% in the 416 area!

It’s unsurprising that condo sales have increased by 17.4% since last year. Whether it’s young families, single professionals, or retirees, all demographics are turning towards condo living as an affordable alternative to detached or semi-detached homes.

Pre-Construction Condos In Toronto: Lower Barrier to Entry

If you’re coming from a smaller market, getting started investing in Toronto can be intimidating because of the higher prices.

Pre-construction condos can help you take off the training wheels and up your investment game. By having the option to split deposit payments, investors who are on a budget can ease their way into the market.

We love pre-construction condos for all these reasons. I must say however, my favorite is the rising unaffordability of other property types in Toronto. Given the surge in these markets, I believe that pre-construction condos in Toronto over the coming decade will be a boon for conservative investors looking to hedge their bets against a possible housing dip.

And from here, it just gets easier. Properties are like potato chips: once you have one, you can’t stop yourself from grabbing another, and another. And pretty soon, the multiplier effect will allow you to obtain financial freedom in the future.

Ryan Coyle, Co-Founder CONNECT Asset Management