Is a view to die for worth the extra money when it comes to your real estate investment?
Clients ask me this question all the time, and the answer’s definitely not as clear cut as you’d imagine.
Floor Premiums vs. View Premiums
Floor premiums and view premiums can both affect the price of a pre-construction condo. First, let’s break down both these premiums and take a look at how they might influence pricing.
In Toronto, floor premiums run the range of $1000 to $2000 per floor—so having that breathtaking view fifteen storeys up could come at the added price of $30,000.
View premiums are a lot harder to pin down since they’re totally dependent on the condominium. A corner unit that offers a better view might cost you an extra $50,000. Another development might offer urban views or lake views with different price tags attached. For example, Aquabella Condos’ Lakeside Collection of suites is around $500,000 more expensive than their Urban Collection.
In an ideal world: the higher your premiums, the better the view. Theoretically, a corner unit on a higher floor should afford you a panorama to be proud of. This isn’t always the case, though. Toronto is booming, so new developments are going up all the time. Obviously this isn’t factored into pricing. You might spend big bucks getting that picturesque view of the downtown core, only to have a condo replace it months later.
One way of preventing this? Check out the list of forthcoming developments in Toronto. Here, you can see future developments and find out if a view isn’t all it’s cut out to be. Realistically, your agent should be able to help you out with this.
Factoring in these added costs is essential to making sure you don’t potentially lose tens of thousands of dollars on your investment. Knowing whether or not you can benefit from a better view, either in resale or in your rental price is essential to growing the value of your investment.
Better View, Better Resale?
The short answer? Maybe. But that comes with a caveat.
Condos.ca did a study looking at seven condo buildings in the Yonge and Eglinton area—specifically their MLS sold data, from 2004 to 2016. They adjusted every sales price to its current value and noticed something common in all seven examples: “price changes between floors netted out in the -6% to +3.5% range across floors three through thirty.”
In other words, there isn’t a predictable increase in resale price as you increase in floor level and the most you can expect per floor jump is a boost of about 0.35% in your resale price. That said, they only looked at seven buildings limited to a very specific neighborhood.
Which is all to say, and this is my caveat, that if you’re investing in a pre-construction condo and a floor increase costs you less than 0.35% of the total price per floor, you’re probably okay to move up.
Higher View, Higher Rental Price?
Thankfully, the answer to this question is a little more straightforward. Renters do actually value views, and they’re willing to pay for them.
Shaun Hildebrand at Urbanation crunched some numbers for truecondos to actually prove this. According to his findings for a one bedroom in Burano Condos, tenants were willing to pay an average floor premium of almost $20 per month—or $240 per year per floor. In other words, nearly a quarter of a $1000 floor premium in a year's rent alone!
Keep in mind: this is only one condo building, and what might be true here may not be true for another project at a different location.
So, to an extent, views do matter. But so does context. Be sure to look at every variable before buying up, and make sure it makes sense to you.
Alternatively, I’d be happy to help you guarantee you get a return on your investment. Just give me a call!