One of the surprising fallouts from the Covid-19 pandemic in the real estate market in Canada is the sharp increase in prices across all types of housing. Many experts had predicted a flat growth or even a downswing in the real estate market, especially in condos, but that has not happened. In fact, the direct opposite has happened. Toronto's condo prices grew 10% and more surprisingly, Montreal's condo prices grew 13.5% in the last year. Also, even before the pandemic, we have seen condo developers across the country build new condos in record numbers. With all that, we can definitely call this a 'condo boom'. But how does a boom in condo prices affect the condo management business? We explore the current red hot condo market's impact on the condo management business in this post.
The single current biggest driver of the condo prices
Canada's immigration policy allowed roughly 350,000 new residents into the country in 2019. That is a large influx of folks and they have played a large role in driving condo prices upwards. Whether units are bought to live in or as investments, the influx of immigrants and dollars have (thus far) successfully mitigated any fear of a pandemic-induced real estate crash.
One staggering figure from StatsCan shows that 70,000 residential condo units have been pre-sold in the Toronto market. We're talking about condos that have not yet been built yet. Those are massive numbers to comprehend. Many believe that any real estate downturn would necessarily follow a slow down of immigrants entering the country. We have yet to see signs of that happening.
2 ways a condo boom affects condo management businesses:
1. More condos built = more condos to manage = growth in condo management business
This one is quite logical. As condos become attractive investments, we have seen time and time again large numbers of new developments prop up. Such has been the case in the past few years where condos have gained in popularity. Along with the number of units and communities increasing in each city, there is naturally a need for management companies to manage them. As such, there have been an unprecedented growth in condo management companies and also in new startup management companies. This, in general, is good news for condo management companies.
2. As condo values go up, investors flock in, which means more tenants living in condo buildings
We mentioned above that the influx of immigrants have driven up condos units that are bought as investments. With the rise in investors, comes a rise in tenant-occupied condo units. What this means for condo managers is that there will be an increase in the second type of residents living in condos: tenants.
Managing tenants or a building with a large proportion of tenants is often trickier than a community which is predominantly occupied by owners. Firstly, legislation on condo corporations tend to lean heavily on governing owners rather than tenants. As such, the guidelines are typically much clearer for property managers. Generally, with managing owners, there is more transparency, more accountability, fewer issues of exploitation and there is a certain balance of power between condo boards and owners.
On the other hand, while there is legislation for tenants, they cover less in terms of actual community living. That is due to the fact that the tenant typically has no legal relationship with the condo board. This can get trickier for property managers to manage.
With condos on the rise and more communities and residents to manage. It is extremely important to ensure that managers have the proper tools in place to scale growth. We would be more than happy to elaborate and share with you our experiences of being a condo manager during times of growth. Feel free to contact us!