The Condo Bible for Canadians by Dan S Barnabic

Author:Dan S Barnabic [Barnabic, Dan S]
Language: eng
Format: epub, mobi
Publisher: Neon Publishing Corp
Published: 2015-06-01T04:00:00+00:00

Financial Disparity and Its Consequences

Financial disparity between individuals is prevalent in any society, and the same is true of communal ownership arrangements like condominiums. There will always be those who are financially better off and are able to regularly contribute to the reserve fund and special assessments and others who may find it difficult or impossible to do so.

During favourable economic times, when unemployment and interest rates are low, financially weaker unit owners are usually able to sustain themselves and meet their financial obligations. In many cases, they may even sell their units for profit, especially during times of high demand. As long as real demand lasts and the economy remains strong, a seemingly homogeneous financial ownership structure may be adequate to maintain the entire complex trouble-free.

Paradoxically, substantial financial disparity among real estate owners may manifest itself in a new and completely unforeseen form. To illustrate, even though Canada is entirely economically dependent on the U.S. and has been following its economic and housing trends historically almost to a T, in the last five years or so, save for the recessionary period in 2008, real estate prices in its two major cities, Toronto and Vancouver, have experienced somewhat of an anomaly. By 2011, the price of real estate, including condominiums, had nearly doubled in those two cities over the previous ten years. Since 1991, they drove the national average housing prices higher. So much higher, in fact, that an average Canadian family can hardly afford to buy real estate in those two cities without extreme financial hardship.

The main reason for such an anomaly is the fact that a significant number of overseas investors, mostly Chinese, Indian, and others from the Asian Pacific rim, are shunning the U.S., probably due to its unpredictable homeland security measures and equally unpredictable external political policies. Hence they are investing instead in Canadian cities.

This may look advantageous to Canadian real estate and its related industries, but it is actually creating a very dangerous precedent. One day very soon, it may put the ordinary Canadian family at risk of not being able to afford a home in their own country.

Newly emerging wealthy business people from China are buying Canadian real estate, outbidding one another at an unprecedented rate, often without even leaving Shanghai or Hong Kong to view the properties they are investing in. Their obvious intention is to invest their money in a secure foreign land where one day they can move and have a family with more than one child – a practice currently discouraged or disallowed by Chinese policy.

The problem is that Canada’s population numbers only 33 million. Rapidly emerging muti-millionaires may be already reaching that number in China and India, countries that are running out of room for their bulging population.

The threat is very real. Canada is the world’s last frontier when it comes to open spaces and opportunities to invest in real estate. By driving the price of Canadian real estate beyond the reach of the average traditional Canadian family, these

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