Thursday, August 22, 2013

It Takes a Glass Condo to Fall on Them

From The National Post, 21/8/13
A falling pane of glass from the Four Seasons Hotel and Residences Tuesday caused minor damage to two high-end vehicles, and prompted the temporary closure of Yorkville Avenue. The glass fell from the 53rd floor around 10 a.m., smashing onto the pavement below. No injuries were reported.  Toronto police were investigating what might have caused the falling glass, the latest in a string of such incidents in the city core. A number of other falling-glass occurrences in recent months have prompted safety questions, legal action and new provincial building-code rules.

A while back, before what is nostalgically referred to as 'the housing crisis' in our neighbour to the south...and come to think of the British Isles and the European nations, and everywhere else that the banks weren't regulated, I ran around like 'Chicken Little' warning everyone that doom was imminent. I got this impression from the TV shows I was watching at the time.  For their escapist value, I was wallowing in various HGTV programs that showed couples with no savings, no assets, and occasionally, no jobs, expressing keen disappointment that the palaces they were checking out didn't have granite countertops in the designer kitchens, double sinks in the master spa bathroom or 'man caves' in the basement..... whatever those are.

(Are they what we used to call Rec Rooms?)

It just seemed to defy common sense that so many people were buying houses with no money down.... Without establishing what we used to call 'equity'.

The hostesses of these programs would say such ridiculous things as:
"Let's see....You have a golden retriever, so you need a large yard, three kids who need a safe cul de sac and good schools, you have no money down, you've been approved for $500,000 by the bank and the government is kicking in another $50,000, so you can offer $750,000 for this shack!"
Or something like that.

Then the couple would sneer at the size of the chandelier or the colour of the walls in the 'great room' and go on to look for something even more expensive.  Something slightly 'over their budget'.

And I would shake my head with chagrin.

The novelty that attracted me to these shows has worn off, so I don't watch them much anymore, but lately when I do flip by, I notice that a lot of the houses that people WITH jobs are inspecting are empty shells and need to be bought from the bank on something called a 'forced sale'.

Hmmm.  They don't like to use the nasty word 'foreclosure' on TV.
(I'm surprised no one has come up with a series that follows the former owners as they wander from relatives to motels to the streets for survival.  Sounds like a natural).

All this is to say that I was right to be skeptical.  And now, I wish to add my voice to the doomsayers who are grumbling about the condo market in our city.  Call me Cassandra, if you like, but it just doesn't make common sense to me that it's a good idea for our city to have so many buildings filled with tiny units, bought up by people from very far away as 'investments', who have no intention of living in them, but are hoping to flip them at a profit either before or right after closing.

This ranks pretty high on my personal list of list of impending disasters for everyone involved.  Although the shabby building standards which result in falling windows from brand new luxury buildings is, admittedly, something new for me to worry about, I've witnessed several real estate crashes in my lifetime, so the possibility of the sudden evaporation of nest-egg equity is not so far-fetched to me as it seems to be to many others.

I also suffer from the misfortune of having had a pretty good liberal arts education which included a brief mention of the Dutch tulip bulb bubble of 1637.  I am a big fan of tulips, especially after a recent visit to the annual spring celebration of the flower in Keukenhof, Holland, where you can wander among acres of tulip beds to your heart's content, but if I were living in 17th C. Europe, I don't think I'd have thought it was a good idea to spend over $1000 on one bulb.  I would have been right then, and I think I might be right about this little bubble now.

I have lots of concerns.  All of them founded on experience.

I, myself, have lived in three, count 'em, three, condos in my tenure here on the planet, so I know a little whereof I speak.  While it's true, my experience is limited to townhouse developments, the arrangements are pretty much similar to high rise units.  Condos are run by relatively active member-elected boards and 'managed' by companies who are just recently being regulated and whose 'managers' are finally being required to be certified.  I've been very lucky in that department, but others I know of, not so much.  There have been recent reports of boards deciding to cut costs by closing perks like pools, or, at the other extreme, assessing owners for lavish lobby upgrades.  Some are too lax, others, too fascistic.  You never know.

Condo developments are not just tall buildings.  They are communities, if you will.  And communities are made up of people.  People who live there and make important decisions about matters, like what to do with the often exorbitant 'fees' that are collected each month, if they are, indeed, collected.

It's sometimes difficult to get them from absentee or bankrupt owners and investors (just ask people who own condos in Florida after the recent upheavals).  And then, what?

Resident owners take care of things, and watch out for each other and the kids, if there are any.  Absentee owners don't really care too much about the day-to-day operations.  If they decide to rent their units, and they don't actually reside in town, they must hand off this chore to others with little interest in the process past their commission.  (They might even discover a rental agent has been renting out units without the owner's knowledge, pocketing the money. It happens).

How would you like to find a drug den or grow-op in the unit next to yours?

Possibly even worse, I once looked at a unit in new luxury building on a floor that had recently 'opened up' for sale because the private boys' school across the street had reneged on its deal to buy two floors for student residences.  I didn't notice this arrangement outlined in the fancy sales brochure when I first looked at the building.  Two floors of 'dormed' male high school kids in a luxury condo.
Sounds like such a good idea!

If absentee owners decide to hang in there and not rent out their properties, well, the thought of living in a 'ghost' building has little appeal to me. If you think I exaggerate, let me tell you that there are quite a few buildings I've been keeping an eye on in my area and I don't think many of the units are actually occupied.  How do I know?  Well, when month after month there are very few lights on in most of the windows in the evenings, it strongly suggests either the occupants are fanatical conservationists or, more likely, "the lights are off because nobody's home."

The residents can't all be in Florida.  In August.

(For your enjoyment, I am using the popular technique, employed by the mainstream media, of illustrating depressing content with gorgeous pictures, so you won't notice the negative message).  

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