The condo market has shown considerable variability in recent years, with average price increases ranging from 5% to 25% depending on location and property characteristics. Investment performance analysis from typical developments, including sales data from Faber Residence, reveals that condos can still deliver strong returns when selected based on specific criteria rather than general market assumptions.
Location still trumps all other factors
Prime urban locations with restricted development potential consistently outperform areas with abundant land for new construction. Properties within walking distance of major employment centres have appreciated 12-15% more over five years than identical units located farther from job hubs. Similarly, condos within 10 minutes of premium amenities command price premiums increasing from 8% to nearly 15% since 2018.
Established neighbourhoods with strong retail and service infrastructure perform remarkably well even during broader market fluctuations. These areas typically experience 30-40% less price volatility during economic downturns than emerging neighbourhoods, providing more consistent investment returns regardless of market timing.
Micro-location factors such as view preservation, noise exposure, and sunlight access increasingly impact valuation. Units with protected views retain approximately 18% higher value than comparable units with views compromised by new development, highlighting the importance of zoning protections in investment decisions.
Hidden costs that eat away at returns
Fee structures represent a critical yet often overlooked component of investment performance. Analysis reveals average association fee increases of 4-5% annually over the past decade, exceeding general inflation in most regions. Buildings over 20 years typically experience steeper increases approaching 6% annually as major systems require replacement or upgrading.
Special assessments have become increasingly common, with approximately one-quarter of associations imposing at least one primary assessment (exceeding $5,000 per unit) within any five years. These unplanned expenses can significantly erode investment gains – a $15,000 special assessment on a $500,000 unit effectively eliminates three years of average appreciation in many markets.
Supply gluts vs. limited inventory markets
New development volume relative to existing inventory provides a reliable predictor of short-term price performance. Markets experiencing supply increases exceeding 5% of current inventory typically see 3-4% price suppression compared to areas with balanced development pipelines, regardless of demand strength.
Absorption rate analysis offers a precise measure of market health. Locations where typical units sell within 20-30 days show healthy appreciation averaging 6-8% annually, while areas with 90+ day average selling periods often experience flat or declining values regardless of broader economic conditions.
Investor concentration within individual buildings creates another measurable risk factor. Property owners below 55% experience average appreciation 3-5 percentage points lower than comparable buildings maintaining 70 %+ owner-occupancy rates. This pattern persists across all price points and locations, reflecting lending restrictions and maintenance standards.
Pre-construction purchasing, once a reliable investment strategy, now shows mixed results. Buyers paying deposits 2-3 years before completion realised average gains of just 3.8% upon completion in recent cycles, compared to historical averages of 15-20%, reflecting more accurate initial pricing by developers.
Condos remain viable long-term investments when selected with careful attention to specific quality factors rather than general market trends. Successful investors focus on buildings with strong owner-occupancy rates, healthy reserve funds, quality construction, and premium locations within established neighbourhoods. By contrast, purchasing decisions based primarily on price considerations often result in underperformance when accounting for escalating fees, special assessments, and below-average appreciation in oversupplied locations.