Canadians who have made the minimum down payment for their condo purchases half-a-year ago are likely to have much reduced equity now, according to analysis by real estate information portal Better Dwelling.
“In April, [CMHC] warned first-time buyers about buying a condo at this time. Despite the warning, many went ahead and bought one in May,” Better Dwelling said in a new analysis of the Crown corporation’s figures.
Assuming a mortgage rate of two percent, a 25-year payment term, and benchmark prices, buyers in Toronto are “virtually underwater” as of October, Better Dwelling said.
“Across Greater Toronto, the return on investment with a minimum down payment currently stands at a loss of 112.36%,” Better Dwelling estimated. “For condos in the City of Toronto, it’s even higher at a loss of 125.09%.”
Toronto condo buyers had roughly $3,863 in equity in May (0.66% of the benchmark), which fell to a minuscule $20 in October.
Vancouver posted comparatively better numbers.
“Across [the Real Estate Board of Greater Vancouver], the return on the minimum down payment for a typical condo is a loss of 56.49%,” Better Dwelling said. “Vancouver East stands at a loss of 82.53%, and Vancouver West works out to a loss of 80.82%. While not as bad as Toronto, a similar observation can be made: city units are doing worse than suburban ones.”
Vancouver condo owners had about $23,541 of equity on a typical condo, about 3.44% of the benchmark. The figure was estimated to be $12,709 (2.16%) in Vancouver East and $17,673 (2.26% equity) in Vancouver West.