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Takeaways
- Institutional buyers are taking unsold Toronto condos at 20 to 30 percent discounts.
- That can put a floor under the wider market, as it did in Miami after 2008.
- Owner-occupiers should check who else owns in the building before buying.
Transcript
Transcribed from the video audio. Obvious transcription errors fixed where the intended word was certain; wording is Jim's.
Do you want the good news? Or do you want the bad news? Good news? Okay, I'll start with that. This is about the institutional buyers who are swooping up and buying unsold condo inventory in Toronto, just to and higher capital. They have a war chest of several billion dollars. $300 million is backed by the Ontario government and they are going to the developers who have unsold condo inventory and swooping them up at a 20 to 30 percent discount.
So here's the good news. This was the exact playbook that was used in 2008 in the Miami market. When the great financial crisis hit in 2008, Miami had a very similar situation to Toronto with all kinds of unsold inventory, the threat and to bankrupt a ton of developers. And when this playbook was played out, this actually helped to build a floor under prices in that market.
So to me that's the good news is that maybe this helps to bottom the condo market. And this is a very specific type of condo by the way that we're talking about. Largely, these were like investor -built condo small units. What is the bad news? I would hate to live one of these buildings.
It would bug me so much if I had bought six or seven years ago pre-construction with the dream of living there with my family and it's going to be great and it's going to be like mainly resident owners. And now I have my unit on the seventh floor, for example, and every other suite is owned by that institutional buyers.
I have now bought into an apartment building where I am very much the minority owner. And why do I think that's bad? Because these institutional buyers, if they own half the building, whether technically they should or shouldn't or legally can or can, I do fear that they will have a lot of influence over boards on decisions that are made with respect to maintenance of the building, et cetera.
So I think it's good news for the broader market in that hopefully it helps to build a floor. I think it is bad news if you buy one of those buildings. And again, it is an important thing to realize when you buy condos, you have to know what you're getting into. Work with the experts.
If you want the report we built, just to message me report, we'll send it to you. It's also on the condo section of our website betterproperties .ca
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