That question is typically one of the first I ask a client looking to buy a condo, because I know the answer will impact their options greatly.
It is also a question that needs to be re-examined.
Since the inception of the condo boom there has been a notion that a parking space is critical to propping up the resale value of a unit. In 2008, lack of parking was the number one reason cited by Toronto buyers for not buying a particular condo according to a TD Bank Financial Group poll. The belief has been if you have parking your condo will sell faster because everyone wants it and it is only getting more expensive. This thinking still exists today because in some cases it is true and everyone still complains about how hard parking is to find and how expensive it is. It would be dumb to buy a condo without parking.
Or would it?
Today, attitudes are shifting. Infrastructure around new condominium developments is starting to catch up and people are starting to realize the big benefit of the condominium lifestyle: you don’t need a car.
The gridlock is getting worse and the cost of owning a car downtown is going up. People are buying condos because they don’t want to commute to work, they don’t want to drive and they want to be near shops and restaurants.
Companies like Zipcar, Autoshare, Car2go and Uber are making it easier than ever to not own a car downtown. The new reality is developers are having a harder time selling parking spots and are lobbying the city for relief in how many parking spots they must offer. The city of Toronto usually demands .67 to .75 parking spaces per unit for most condos and up to 1.1 in some outlying areas but will waive that ratio depending on location.
For the sake of this article let’s say a condominium parking spot costs an additional $40,000, the low end of the spectrum. That additional cost could be invested elsewhere or put into the condominium itself. Yes, you will likely have to pay $100-$200/month to rent, but the average maintenance fee on owning a parking spot is $40 per month, something many people are not aware of.
The cost to rent a spot isn’t as daunting as it may seem once you do the math. The additional $40k you pay for the spot will add just under $200/month to your mortgage, plus the maintenance fee. You are conceivably paying $240/month for a spot you can likely rent for much less.
The argument for renting a parking spot over buying a parking spot is stronger than ever. If the parking spot isn’t the selling feature it once was and it isn’t appreciating in-line with the condo unit, why spend the extra $40,000? This is especially true if you are in the $300,000 to $500,000 price range where an extra $40,000 built into the price is a significant chunk of your budget. In addition, it isn’t automatic that your unit will sell for $40,000 more than the exact same unit without parking. In today’s market the selling price of a unit may have more to do with intangibles like timing, upgrades, and staging.
Another theory why parking is becoming less attractive is that home buyers just can’t afford it. A condominium is the first step to owning a piece of real estate in Toronto and with the average price per square foot reaching $600, first-time buyers are being priced out. As such, affordability in Toronto is eroding quickly and as it does new trends in the behaviour of home buyers are emerging.
The real cost of not owning a parking spot may be not knowing you will always have a place to park your car, but if you are willing to take that risk, you will open yourself up to more and potentially better options on the resale market.
I see these options everyday, so if you are interested in knowing more you may contact me anytime.
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