Vol.4:3 Opportunity Knocking:
A brief history of the Winnipeg condo market and why now might be the last best time to jump in.
10 years ago the Winnipeg condo market was hot, hot, hot - condos that were well-prepared and priced right sold at or above their list prices in 1-2 weeks tops.
Today, the tables have turned, and the number of condos that sell below their list price vastly outnumber the ones that sell at and above list, and selling in under 4 weeks is either a miracle or the result of a sacrifice list price.
In today’s market, a condo that has been well prepared and marketed appropriately with a current-market list price has a good chance at selling after 30 days on market for within $5,000 of its list price. But here’s the thing - that sale price is typically lower than what the condo owner paid for it 5-8 years previously.
Ouch. “What the hell happened?” you ask? I’ll get to that but first I want to explain why now is a great time to buy a condo for certain people in the right circumstances. Are you one of these people? You decide. Here are the 4 main criteria:
1. First and foremost, you value the benefits that come from ownership* but either can’t afford home ownership at the moment, don’t want the maintenance responsibility of home ownership or no longer want or need the amount of living space a home typically affords;
2. Just as important is that you aren’t in a position where you might need get your money out of the condo quickly. If you need make a quick move but can afford to rent your condo, you’ll make out OK but selling quickly is usually only achieved in this market by a willingness to lose money. I joke that the condo market reminds me a little bit of the song Hotel California, where you can "check out but you can never leave". Never fear, though, this will eventually change;
3. You have a good sense of your personal level of tolerance for living closely surrounded by others.
If you resonate with the above, then there is a good deal on a condo out there for you, whether you are looking for a small bachelor or 1-bedroom that won’t cost you more than $800 month all-in* or a 3-bedroom with indoor parking and all of the conveniences you would expect from a modern home with perhaps a pool and gym thrown in for good measure; and
4. Of less importance but still significant, you do not require a great deal of storage.
*The rights of ownership include but are not limited to the right to paint the walls whatever color you want, to make as many holes hanging you art as you see fit, the right to make upgrades and benefit from the value they add to the condo when it’s time to sell, the right to have 10 of your best friends sleep-over for as long as you like, the right to rent your condo for whatever reason, the equity that results from payments being made over time and the possibility that one day you will own your shelter, significantly lowering your monthly overhead.
**By “all-in” I mean mortgage payments, monthly condo fees, property taxes, insurance and utility costs combined.
So, what happened to tank the condo market?
Have you ever heard a horror story about condo owners receiving unexpected "special assessments"? A few years ago, there were a great many of these stories floating around. A special assessment is a sum of money – usually significant - that each condo owner is ordered to pay over and above the monthly condo fee in order to have a unexpected major repair or upgrade done that there wasn’t enough money set aside for in the reserve fund that each condo owner contributes to through their monthly condo fees. Some condos owners were given bills of $20,000 and only a handful of months to come up with the cash.
The long and the short of it was that a great many condo corps were mismanaging their reserve funds, sometimes not charging enough for future repairs because they hadn’t done their due diligence in finding out what those repairs were going to be and sometimes through sketchy practices such advertising lower monthly fees to attract buyers only to raise them later.
As a result, there was growing pressure on the Manitoba government to provide more protection for consumers and in February 2015 the government responded by giving the industry notice that every development of over 6 units had 3 years to bring those developments into compliance with new legislation.
The new legislation contained many rules that were designed to curtail shady practices but its centerpiece was that every condo development had to have a 30-year reserve fund study completed by a qualified engineering firm and the monthly condo fees adjusted accordingly by February 2018. Furthermore, that study had to be updated every 5 years moving forward.
There were other factors in the slowdown of the condo market, but this was by far the biggest and there were a great deal of buyers who wisely, in my opinion, put off buying a condo until this critical reserve fund study had been completed, condo fees adjusted appropriately and the new rules in place.
The Comeback of the Condo Market
It’s been almost 3 years since the new legislation came into effect but the condo market is only just starting to make a comeback. The latest statistics show that sale prices are just starting to rise ever so slightly. Eventually, and especially with house prices going through the roof as they are right now, the condo market will make a fuller recovery, making the present moment a most opportune time to climb on board.
If you find yourself in the right set of circumstances, that is. And if you do, here are some possibilities to consider:
Some aspiring homebuyers are planning to start out with the purchase of a condo then keep it as an investment property when they are ready to make the move to a house, some current homeowners are purchasing condos as investments and are having their young-adult children rent-to-own them as a way of helping them into the real estate market, and yet other homeowners are cashing in on the sellers market that exists right now and purchasing the larger more expensive condos as their retirement homes.
If you have any questions about your circumstances and whether or not buying a condo might be right for you, please ask. Alternatively, if you have a condo that you have decided to sell, I know how to prepare and position it in the market for the best possible results.
Coming Soon: an update on the hot sellers market that has developed during the pandemic.