As early as 2008, South Guelph started seeing a new type of product coming onto the market that it had never seen before.
Mid-rise apartment-style condo buildings were the new craze and many first-time homebuyers and investors flocked to the sales centres, lining up for opening day to place their deposits.
It made sense, considering the fact you could put down a minimal deposit and own real estate for around $150,000 for a 1-bedroom unit. Even if you went all the way up to a 3-bedroom, at that time you were still only paying around or just under the $200,000 mark.
Since then prices have definitely gone up. Many people have realized their profits, sold their investments and moved onto something else. I can’t help but wonder though, especially with more mid-rise apartment style condo’s coming onto the market, is this kind of product still a worthwhile investment? And if they are, which one of the 1, 2 or 3-bedroom units available are the best option to invest in?
Well, let’s look at some data!
Before we go any further, I would first like to qualify my data. This wasn’t just a quick-search I did on Google or someone else’s stats I ripped off the web. I performed a comprehensive analysis of all the 1, 2, and 3-bedroom apartment style condo’s that were sold in Pineridge/Westminster Woods between 2009 and 2015 on MLS. Exactly 264 transactions were carefully analyzed and I calculated my sales price averages weighted against the square footage of each unit for more accurate figures. These findings reflect only what was sold on MLS. Private sales and builder inventory that were not sold on MLS are not reflected in this data. After many, many hours of research and just over 700 lines of awesome, spreadsheety-goodness, these are the findings I came up with:
You can see in 2013 the entire market shifted, with the average year-to-year price increase for all 1, 2, and 3-bedroom units jumping up 7.08%. However, with their price increase, their average Days on Market (DOM) jumped up as well, more than doubling the previous years figure. Also, from 2012 to 2013 the total volume of sales for all 3 types of units nearly doubled.
However, in 2014 and 2015 things started to get interesting. The average year-to-year price increases for all 3 types of units dropped down to around 3% for each year, but if you look at the numbers a little bit closer, you can see that they were heavily dragged down by the 3-bedroom year-to-year increase stats. Both 2014 and 2015 1 and 2-bedroom units year-to-year price increases performed fairly well for the most part, but the 3-bedroom year-to-year price increases for each year are quite low, almost hitting a 0% increase from 2013-2014.
Not surprisingly, in 2014 and 2015 the average DOM for 3-bedroom units was also higher than both the 1 and 2-bedroom units average DOM, reaching just over 50% higher than the 1-bedroom units average DOM in 2014.
Another point worth mentioning is that if you look at the sales volumes of the 3-bedroom units, it has consistently been much lower than it’s 1 and 2-bedroom counterparts. This means that supply of these 3-bedroom units has always been extremely limited over the course of this data. Coupled with their highest average DOM and their lowest average year-to-year sales prices increases, I would have to say it appears that these 3-bedroom units have never really been in high demand and have consistently performed quite poorly from an investment perspective, despite the two impressive market-blip increases they saw in 2011 and 2013.
Now if you’re asking me which is a better investment, the 1 or 2-bedroom units, to be honest, I’d have to say it’s a bit of a toss-up.
If you consider the past 6 years of data, year-to-year price increases are higher for the 2 bedroom units. However, if you focus on just the past 3 years of data, year-to-year price increases are higher for the 1-bedroom units. Personally, I would lean towards the 1-bedroom units for their 6.62% year-to-year average price increase performance over the past 3 years, which still out beats the 2-bedroom units 6.06% year-to-year average price increase performance over the past 6 years.
Arguments could be made in either direction for comparable DOM between 1 and 2-bedroom units and also for their comparable yearly sales volume as well. The 2-bedroom units certainly sell a lot more than the 1-bedroom units, but then again that can be a positive or a negative depending on what your objectives are.
In the end, I think whichever way you choose to look at it, the glaring outcome of these findings are obvious: If you are considering investing in an apartment style condo unit in Pineridge/Westminster Woods, a 1 or 2-bedroom unit is very likely a much better investment option than their 3-bedroom counterpart.
Until next time, Happy Investing!