# Future of Condos



## JackJac (Mar 13, 2017)

This might be a silly question, but what is the long-term outlook on condos? I'm thinking specifically of the Toronto market. Some condos look cheaply built and I'm wondering what would happen when or if these condos reach the point of being uninhabitable and/or requiring constant maintenance to the point where fees would sky rocket and residents would bail out of financial necessity. If such a scenario took place where everyone was forced to leave due to rising fees or decaying structure, what would happen? Would owners just totally lose out and be left with a piece of the sky?


----------



## sags (May 15, 2010)

I wouldn't buy anything that had walls of glass...........big problems looming in those.

The apartment a block down the road was 1960s and starting to look a little dated. They redid the whole surface and it turned out awesome, so it can be done.

The question in the future is if people will have the money in reserve funds to maintain the buildings properly. 

People tend to not want to pay more per month because they think they will be gone before there are problems.


----------



## 319905 (Mar 7, 2016)

A good question actually, and not so silly especially if you're looking at condos which I am. I'm currently looking at a solid enough older 25 story (?) concrete build, 1978, well maintained, looks great, windows/doors replaced and so on ... but what is the planned/expected lifetime of such a building, and the newer buildings? And there's the retrofitting with newer more efficient technology ... I'm thinking that for the most part what you see is what you get ... e.g. if it's electric baseboard heating it will always be electric baseboard heating.


----------



## sags (May 15, 2010)

Underground parking in a concrete garage ? Maybe 30-40 years ?

Anything can be replaced well if there is enough money. I would make sure the condo reserve fund is well funded.


----------



## Mukhang pera (Feb 26, 2016)

One way it can be handled - at least in B.C. - is for owners to vote in favour of winding- up the strata corporation and selling off the whole kit and kaboodle to a developer so it can be demolished and something new built in its place.

Here's an interesting B.C. case on point. A lesson in how one dissenter was able to throw a wrench into the works:

http://www.courts.gov.bc.ca/jdb-txt/sc/17/16/2017BCSC1661.htm


----------



## 319905 (Mar 7, 2016)

Concrete garage ... good point ... here's a link fwiw, I'm guessing there are many more ... http://www.huffingtonpost.ca/dan-s-barnabic/condos-lasting_b_6956838.html


----------



## doctrine (Sep 30, 2011)

The oldest condo building in Ottawa is about 45 years old. The units for sale are typically going for $150-200k. Whereas new condos in the city are going for $300-500k. The trend is pretty consistent with ones not as old. I fail to see how condos are a great investment over decades. 

It is kind of like a car. You can never sell an old car to buy a new one. Even if the new car costs less in inflation adjusted terms. It doesn't matter. Depreciation is a thing.


----------



## 319905 (Mar 7, 2016)

^ My observation as well ... Ottawa ... an older condo (refurbished ... new floors, bathrooms, ... ) I was following was priced at $405K in 2015, sold for less than the listed $295K (agent's info) a few months ago. The newer condos, forget it, for me anyway, way overpriced ... another smaller detached single home is starting to look like the way for me to go.


----------



## JackJac (Mar 13, 2017)

I suppose it's true that anything can be renovated if there's enough funds in the reserve...but I don't know...some of the condos I visited felt so Ikea-ish and bachelor units are pushing the 300s...seems absurd to me.


----------



## latebuyer (Nov 15, 2015)

I think you need to look at will it be cheaper for you to rent or own. I bought my condo for 190,000 in the lower mainland 5 years ago. My costs to own are about 1000/month including mortgage, strata and taxes. I would factor in about 200/month more to save for special assessments. At 1200 per month that is cheaper then renting a 2 bedroom. Still if my mortgage was more then it is (it is only 626/month) i'd have to reconsider if renting is cheaper. (After this term I only have 10 years left). However, as well it is true my strata fees will go up, but rental costs will go up as well. So, even if by the time I retire and have paid off my mortgage my strata fees are something like 600.00, the cost of rent will be more as it is going up 2% per year. I agree my condo probably won't in the long run appreciate but I hope to at least get what I paid for it out of it. In any event, it sounds like unless you get the right place, renting can be a hassle.


----------



## tdiddy (Jan 7, 2015)

latebuyer said:


> I think you need to look at will it be cheaper for you to rent or own. I bought my condo for 190,000 in the lower mainland 5 years ago. My costs to own are about 1000/month including mortgage, strata and taxes. I would factor in about 200/month more to save for special assessments. At 1200 per month that is cheaper then renting a 2 bedroom. Still if my mortgage was more then it is (it is only 626/month) i'd have to reconsider if renting is cheaper. (After this term I only have 10 years left). However, as well it is true my strata fees will go up, but rental costs will go up as well. So, even if by the time I retire and have paid off my mortgage my strata fees are something like 600.00, the cost of rent will be more as it is going up 2% per year. I agree my condo probably won't in the long run appreciate but I hope to at least get what I paid for it out of it. In any event, it sounds like unless you get the right place, renting can be a hassle.


I think you have left out the opportunity costs of having principle amount invested in condo vs stocks/other investments. 

Sounds like you have a much lower price:rent ratio than we do here in N. Vancouver. I share a lot of the sentiments expressed above re: concerns of long term depreciation of condos. I feel if you are looking in a downtown core area of a major city this is less of a concern in a well managed building. But with our work being in a suburb, my logic has been we would rent a condo or own a house. We don't need the space of a house nor am I comfortable with the 1.5 mil price tags in our neighborhood so renting it is


----------



## latebuyer (Nov 15, 2015)

I suppose my opportunity cost was the downpayment I made which was 45,000 dollars, plus a 15000 prepayment. What concerns me is some people just want to throw in the towel, let the building deteriorate and have developers buy it. I really don't know where I will live if I have to sell. I certainly couldn't afford to buy in a newer building. It seems like the key is to find a good place to rent or that you had to have bought earlier when prices were low.

FYI The other advantage to buying a lower cost condo is that when I made a 15,000 prepayment the first term, it took the amortization down 8 years which is pretty good.


----------



## tdiddy (Jan 7, 2015)

Right. So if you would have put that 60K in SP 500 5 years ago you would have made a hefty profit by now, and that money would still be potentially earning ~10% per year (about $900/month I think)


----------



## latebuyer (Nov 15, 2015)

I have no doubt i'll save in retirement though. I wouldn't want to be renting in retirement. Plus, I should get some of the money I put into the condo back, even if it is land value only which would offset the gains made by investing. Who knows what would be best? With the rental market the way it is in the lower mainland, i'm glad i'm not renting.

I also think millenials who haven't been through 2008 are a bit misguided by investing. The market could drop down at anytime and drag down returns. Here is Bogle's estimate:

http://awealthofcommonsense.com/2016/09/the-john-bogle-expected-return-formula/

Still you could argue a renter could save more money to pay for the higher rental costs when they retire.


----------



## tdiddy (Jan 7, 2015)

latebuyer said:


> I also think millenials who haven't been through 2008 are a bit misguided by investing. The market could drop down at anytime and drag down returns.


I think many generations have been misguided by investing (someone has to stand up for us millenials  ) the condo market in Vancouver could drop at anytime too


----------



## latebuyer (Nov 15, 2015)

Thats true. I hope this is the case for the millenials as they should be able to own.


----------



## latebuyer (Nov 15, 2015)

Just a note with old condos costing what they are right now I definitely wouldn't buy. For example, my 1982 condo is valued at 303,000. Given the property value will probably go down, I don't think it would be worth it to buy right now. The only reason I may do okay is because I bought when it was cheaper.

I just want to add one thing. Renters may not know this but your property assessment is divided between the building value and land. I remember when my condo was assessed at 226,000 the building was only assessed at 45,000. So the building could drop quite a bit but because of land the condo could hold its value. I'll have to check what the building is assessed at now.


----------



## dotnet_nerd (Jul 1, 2009)

alimanavi said:


> As we all know that Condos will be the new future of Real Estate in today's busy world. Looking for a nice and cosy place to live in then check out the best and affordable Condos only at Haus Realty – Ali Manavi & Jason Farzinpour. Contact us to find the house of your dreams in the Beautiful city of Vancouver.


https://youtu.be/anwy2MPT5RE?t=15


----------



## james4beach (Nov 15, 2012)

It's interesting that among the kinds of spam we see at the forum, there are two kinds that dominate:
1) automatic junk garbage/scams that are barely intelligible, often posted out of foreign countries
2) more coherent real estate and mortgage related spam


----------



## Mukhang pera (Feb 26, 2016)

I am beginning to think the future of condos looks bright indeed. I am reinforced in this view by this recent post in the future of real estate thread:



AltaRed said:


> Yes indeed. There is a tremendous lack of seriousness and foresight about sea level rises. Whether one is a climate change zealot or denier, glaciers will continue to melt and sea levels will rise, all within the natural cycle of ice ages, etc. Oceanfront property near sea level is pretty much toast everywhere.


All I disagree with there is the comment about oceanfront property. It's not just low lying oceanfront that's in danger. In many places, the land is low for miles inland and will flood. In the Vancouver area, all of Richmond will soon be submerged. Along with a good chunk of Vancouver and on up the Fraser Valley. And won't the St. Lawrence start to run backwards and flood as far as Toronto and beyond?

So high rise condos will be the place to be. Maybe up 20 floors or so. Those most in demand will be those that allow owners to tie their boats up to their balcony railings.

Of course, a corollary will be great price gains in higher-elevation Vancouver real estate. Today's $5-million boxes in Kerrisdale with look cheap at $50 million, with Vancouver real estate in increasingly shorter supply. So much for the "it's a bubble" crowd.


----------



## twa2w (Mar 5, 2016)

Older condos obviously often look dated( exterior and common areas) with style and fashion from the time they were built. Many older ones had amenities that were acceptable for the time. Perhaps no in suite laundry. Smaller bathrooms, no ensuite bathroom. Smaller windows. Limited or no gym. Some older ones had a pool and sauna which are not as popular today. Many were built using post tension cables and may not qualify for CMHC ins. Banks require higher fown payments.
New condos have bigger windows, insuite laundry, on suites, a nice gym, a party room etc. They look uptodate. High speed elevators, wider halls. They are often build in locations eadily accessible to transit or closer to down towns when old industrial commercial areas get redeveloped so they compete directly with old condos.

This creates more demand and pricing. The developer sets the condo fee low.

Single family housing styles on the other hand do not change as quickly and some owners often update and renovate. The older houses are closer to city centres and transportation routes so this keeps value higher vs new subdivisions that are further out.
Condos can quickly get over built and flood the market. Many start in the stronger part of the cycle and don't get finished until the recession hits.

Of course you all know these things.

Look at townhome style condos as an in between. 
If an older high rise and post tension cable, check to ensure maintained. 
Consider renting in a building before buying to get an idea of issues, location etc. 
Of course look at reserve fund and also reserve study. A big number can look impressive but costs to reface or redo windows balconies etc can be huge on a condo.
I think condos are here to stay and they will evolve. They will continue to have issues like the damaged parking garages, leaky condos, glass facings falling off and for sure some new ones.


----------



## ian (Jun 18, 2016)

We rented in a higher end four story wood frame condo in Calgary. Ten minute walk to rapid transit, downtown drive in ten minutes. We would never recommend a wood frame condo to anyone.

We had intended to buy in this complex of buildings. It ticked all of our boxes. Different story after four years. The building was four years old when we first moved in. Building was going downhill. The owner had two assessments, one of the almost $30k. Lots of renters moved in as owners moved out. After speaking to a number of people we learned about litigation. When we left several of the buildings had scaffolding on the windward side of the buildings. It looked like balconies were being repaired. Doors and windows in front of the balconies were de installed. Not certain what the issue was.

Bottom line...we were so glad that we rented prior to making a buy decision. It soured us on condos. When it came to a choice between a condo project and a HOA project we selected the latter.

Two of the major issues we see are that condo regulations/legislation is very much in favour of the developer. Most especially when it comes to pre buys.

The second issue is home warranties. The builders have managed to successfully lobby Government to essentially take most of the teeth and most of the protection (hence the cost to the builder) out of the legislation. From our perspective, buyers of new, yet to be built units are sitting ducks. What you think you bought may not be what you get and there is little that you can really do about it. Sheep ready to be shorn. If you can engage one, get a law firm that specializes in condo litigation to review your documents and provide general advice. It tend to be a small community and chances are he or she will be able to steer you away, indirectly, from properties with bad reputations/multiple litigations. Fortunately public opinion is forcing some provinces to update their condo legislation.

One thing our realtor said that surprised us was that just about all of the high end cement multi story condos/apts had their in house drug dealers. This can be a real issue. We were so naive that we had never even considered this given the types of buildings and the locales we were initially looking at.


----------

