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Tag: Investing in Condos

  • High borrowing costs, record completions lead to condo oversupply – MoneySense

    High borrowing costs, record completions lead to condo oversupply – MoneySense

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    A report by TD economist Rishi Sondhi said sales activity hasn’t been absorbing supply fast enough, with July condo resales in the GTA down 25% from pre-pandemic levels.

    Sondhi said the trend is tied to factors such as a wave of newly built condos hitting the market, elevated borrowing rates that have made it difficult for some buyers to close on their mortgages, and investors looking to sell properties as declining rents and negative cash flow make them unprofitable.

    “The relatively elevated interest rate backdrop means that the gap between the rate of return from a condo in the GTA … and from a risk-free’ government bond has narrowed,” he said in the Sept. 5 report.

    “This may have reduced the incentive to hold a condo as an investment, although the recent drop in yields could be helping to re-widen this spread.”

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    Condo completions in the GTA

    Sondhi’s report showed there were around 19,000 condo completions in the region between January and July of this year, up from about 12,000 during the same seven-month period in 2023 and 10,000 the year before.

    The pace suggests this year could see “record high” condo completions in the GTA, said Brendon Cowans, a sales representative for Toronto-based brokerages Property.ca.

    “You can just imagine all of this supply coming in a high interest rate environment. It’s not a lovely combination,” he said.

    Active condo listings across the GTA were up 63.9% in July from the same month last year, growing from 5,416 to 8,879, according to data from real estate firm Zoocasa. The City of Toronto has seen a similar jump, with active condo listings increasing year-over-year by 61.5% in the same period.

    What’s happening in other major cities?

    Although the GTA leads the country in active listings gains, the trend is in line with other major cities across Canada. Year-over-year active condo listings rose more than 40% in London, Hamilton-Burlington, Mississauga and Ottawa in Ontario, as well as Vancouver. Montreal and Calgary each saw growth of about 23%.

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    The Canadian Press

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  • What happens if you delist your condo? – MoneySense

    What happens if you delist your condo? – MoneySense

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    This is good news for aspiring condo buyers, who now have larger inventories to choose from. But it’s trouble for those trying to sell their condo, who may have to either significantly reduce their asking price or, in a worst-case scenario, delist their property until the sellers’ market becomes more favourable.

    Growing numbers of condo owners are choosing the latter option. But what sort of consequences may they face for that decision?

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    Will you have to reimburse your realtor for their expenses?

    Rick Kedzior, president of the Ontario Real Estate Association, says that province’s Trust in Real Estate Services Act is of great help to sellers in this scenario, thanks to the mandatory requirements it places upon agents. B.C., Alberta and Manitoba have all introduced or updated similar laws to Ontario’s in recent years.

    “When an agent takes on a listing, they supply the seller with a schedule of the services that are going to be provided, and that schedule also specifies who will be paying for what,” Kedzior says. “From an agent’s perspective, staging and any other ancillary services they’re providing is the cost of doing business. Another example is any costs associated with an MLS listing. I’ve never seen a situation where the seller gets stuck with having to pay for that.”

    The only (and rare) situation when the seller could get stuck with a bill would be spelled out in the listing agreement. “When you have the meeting to list your home, they may say, we’re going to provide staging or paint the house for you, or some things like that,” says Ahren Spylo, a spylorealty.com broker with Keller Williams Realty in Waterloo, Ont. “And if you decide to take the condo off the market, then they may like to settle whatever that cost is. But that would have to be predetermined.” Make sure you understand the Agreement of Purchase and Sale when you sign it.

    Are there less tangible costs to delisting a condo?

    There can be a stigma associated with a property that gets pulled off the market without selling. “So you put it on the market for, say, 90 days—that’s kind of the norm—and then you take it off the market. There would be, from an agent’s perspective, a question of ‘What happened to that listing?’ ” Kedzior says. But it’s hard to quantify.

    There can, of course, be a very real opportunity cost if you end up changing your life plans as a result of the non-sale. It could interfere with plans to accept a new job in a different community, or force you to pay for upgrades needed to make the property suitable for renting out or accommodating a growing family.

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    Michael White

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