“I think if you do the math and really look at the numbers, as we have, you’ll see that condo investment is really about capital gains and selling,” says Derek Lobo, CEO of ROCK Advisors, a brokerage specializing in apartment buildings. “It’s not about holding onto the property – with the carrying costs associated with those condos, whether in downtown Toronto or the suburbs, that’s not a successful strategy.”
The analysis throws cold water on the dreams of investors looking to leap from flipping to being landlords as the condo market cools. That’s not only in Vancouver, but Toronto and many other urban markets across Canada.
Those condo investors have seen the number of unsold units increase, effectively driving down sale values before and after registration. The phenomenon has suggested long-term leasing as an easy alternative and a way to capitalize on some of the lowest rental vacancy rates in decades.
Still, that strategy may not hold water in the long-term, says Lobo.
Purpose-built rental buildings are poised to overtake condominiums as the single-biggest growth area in the Canadian real estate sector, he tells CREW online, specifically pointing to institutionalnvestors looking to new horizons.
They may ultimately lead the way for condo flippers forced to seek new hunting grounds.
“It has to do with low interest rates, high investor demand, demographic changes and a softening condominium market across Canada,” says Lobo. “All of these factors will boost demand for new apartments.”
Canada’s apartment market has already seen significant growth since the year 2000. Loosening rent control restrictions allows new apartments to be built and rented at market rates, he argues, pointing to over 40,000 new apartment units having entered the market in that decade and a half.
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