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Michael And Pasima Arikat
Millennium Properties
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michael@millenniumproperties.net
(707) 899-5282

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Why Condos don’t Appreciate in Value as Fast as Single Family Homes

Michael And Pasima Arikat
(707) 899-5282

If you’re looking to invest in real estate, you may be wondering how appreciation values compare in detached houses vs. condominiums.

Just in case you don’t already know- Appreciation refers to how much the value of a property increases over time. Determining future home appreciation is no easy feat depending on many factors from location and attractiveness to feel of the neighborhood and the value of the land that the property sits on.

While there are certainly exceptions, it’s common for single family homes to appreciate faster than condominiums. Here’s why:

A basic concept of economics: Supply & Demand.

Supply refers to the quantity of goods available, while demand indicates the want associated with those goods. In general, as supply increases, price decreases. (I could dive deeper into the subject, but for purposes of this article, let’s leave it at that.)

What does this mean when it comes to the value of property? Well, first of all, when you purchase a single family detached home you not only own the house, but more importantly the land beneath it. Land is valuable, as there is a fixed supply. So, it’s safe to assume that the demand for land will always increase. On the other hand, when you purchase a condominium, you only own the specific unit. No land = less value.

Also, it’s likely that more condominium units can fit on single plot of land than single family homes, as condos are often built up instead of out. This higher supply of condos can in turn drive prices down. So, make sure to take note of how many units are in the building or development you are interested in.

There are extra costs associated with condo ownership.

When thinking about investing in a condominium purchase, it’s important to keep the extra fees associated with condo ownership in mind.

When you purchase a condo you are often obligated to pay monthly or annual fees to the community’s homeowners association- the governing group that takes care of all the maintenance and common areas.

More often than not, living under an HOA is the main draw to condo living- it’s this low responsibility lifestyle that makes owning a condo attractive. But, this convenience comes at a cost and is usually a substantial expense. In the end, the value you’ve gained on your property over time may be negated by what you’ve already dished out in extra fees, making your return on investment lower than expected.

Living in a condo comes with restrictions and limitations.

While living under the jurisdiction of an HOA comes with added convenience, it also comes along with limitations.

When you purchase a single family home, you usually have complete control over decisions made concerning your property. These same freedoms are seldom available to condo owners. The CC&Rs, or ‘covenants, conditions, and restrictions’ set by the community’s HOA set regulations on everything from the type of pet you can have to the color you can paint your door. You may be okay living with this specific set of rules, but it can bring some added difficulty when it comes time to sell or rent your place.

Interested in investing in real estate? Contact me to discuss the best options in your area.

Michael And Pasima Arikat
(707) 899-5282
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