Have you ever dreamed of owning a luxury home? It may not be as expensive as you think. When we compared current carrying costs for an average detached home in Kitchener-Waterloo to that of entry-level luxury homes the outcome was surprising. What’s further, some luxury homes cost less per sq. ft. than an entry level detached home.
The Kitchener-Waterloo real estate market has been experiencing an unprecedented surge in residential sales. 2016 was a record-breaking year for sales volume. The most active area of the market appears to be detached single family homes priced below $500,000.
For the last 12 months, in Kitchener-Waterloo, detached homes priced below $500,000 spent an average of 20 days on the market. Historically, that’s a very brisk pace. Furthermore, that number has been steadily declining. So far in January 2017, the average DOM (days on the market) for detached homes listed below $500,000 is 11 days! Standard 1200 sq. ft. detached homes with a garage, which are well updated, may sell for up to a $100,000 over list price. Margins like that can amount to a 25% increase from the list price. A year ago this was unheard of in our market.
Meanwhile, in the last 12 months, homes that listed between $700,000-$900,000 have spent an average of 45.4 days on the market. Property in this price range tends to be significantly larger, and some are even located in luxury neighbourhoods. Traditionally, entry-level detached homes cost less per sq. ft. in Kitchener-Waterloo than luxury homes. This trend is reversing. If the average time spent on the market is 45.4 days for homes priced between $700,000 and $900,000 it indicates far less likelihood of multiple offers and competition among buyers. That’s good news if you’re looking to step up to a bigger home.
Comparing Carrying Costs
If you compared the cost to purchase a $500,000 home vs. $700,000, each with a 20% downpayment and a 30-year mortgage at 3% interest, the difference in monthly payments is only $304 (based on interest only). A price margin of $200,000 could mean the difference between a 1500 sq. ft. home and a 3500 sq. ft. home. One thing to note, luxury properties have added costs like increased property tax, but the payoff could be significant. As homeowners in entry-level homes see their values rising dramatically, luxury homes may become more affordable; this will spur competition and eventually drive growth at this end of the market as well.
Curious what the market is offering for an entry-level luxury home? Contact Benjamins Realty to begin receiving properties of interest today.