According to Statistics Canada, currently approximately one million people own and live in condos. They represent 10.9 per cent of the numbers living in houses. Very few of condo dwellers are aware of the ultimate risks in owning a condo if another Great Depression, such as in the 1930s, were to occur.
There are many potentially minor as well as major hazards facing owners of condos.
Condo owners could be hit by fee increases and special assessment charges that seem to be imposed with some frequency. If we ultimately face a big inflation, all too possible given government’s wild spending nowadays, the fees and maintenance charges would soar. That could be more than condo owners could be willing or indeed able to pay.
Condo owners could be confronted by legal and tax implications of a particular condo. Urban communities often tax condos for new sewers, roads, or other changes, a possibility that should be considered before any purchase.
An accountant and financial adviser should determine ahead of time if the possible condo owner would be affected in some way by developments, for example, if a new electric or nuclear power plant is being considered in that area. Also, is access to public transportation in the future a possibility? That would affect the investment potentials of any property.
A real estate expert should consider the potentials of a particular condo compared to other property. The return on a condo should be at least equal if not better than other forms of real estate, like a commercial building. Too, there almost always is a market for a single family dwelling, whereas condos may no longer be popular. That was the situation both in the 1930s and 1970s, and once again some may shy away from condos.
Above all, however, one should be concerned about serious problems arising if there were a major, prolonged business contraction. Then, many condo owners may just abandon their condos. If many leave, the cost of maintenance would devolve on the remaining condo owners. If most do indeed leave, those remaining would have to pay all the servicing and fees, which, in that event, could be astronomical.
Condo owners dismiss that possibility by declaring that there are adequate reserves that could be a protection against contingencies outlined above. Maybe. In the 1930s, many condo-type owners were caught holding a property that entailed fees and maintenance charges that were unsustainable. The property then could devolve to the mortgage holder with the individual condo owner left with nothing.
For all of the above-cited reasons, it may be much more prudent to buy a single-family dwelling or merely rent accommodation. Too many fail to realize how risky condo ownership could be.