According to a report by Canada Mortgage and Housing Corp, a majority of landlord investors who bought properties in large, high-rise condominium buildings in downtown Montreal are not collecting enough rent to recoup their operating expenses.
A condominium, often shortened to condo in most Canadian provinces, is a type of living space which is similar to an apartment but which is independently sellable and therefore regarded as real estate. It is where the condominium building structure is divided into several units that are each separately owned, surrounded by common areas that are jointly owned.
An article in the Financial Post said that most Montreal condo investors are paying out around $385 more than they make in rent.
The national housing agency estimates that investors who made a 20 percent down payment on their properties are spending more on mortgage payments, condo fees and property and school taxes than the amount they receive in rental income, the FP article said.
The owners of the condos also experienced negative cash-flow while operating expenses were exceeding the rents they were receiving. This has essentially meant that they are paying up around $385 a month from their own pockets.
Canada Mortgage and Housing Corp also said that other factors were not taken into consideration for this report including whether the owners made a down payment larger than 20 percent of the condos price or if it was purchased with a cash transaction.
The ultimate hope for these investors is that their costs would be recouped in the resale of the condo, if market conditions continue to tighten and favour sellers, CMHC economist Francis Cortellino said.
However, Condo prices and sales both continue to increase. The Greater Montreal Real Estate Board recently reported condo sales were up 22 percent year over year, with the median price for a condo up four per cent to $265,000.
It was also reported that around 15 percent condos in some newer buildings were sold at a loss while only 5 percent of condos in older buildings made a loss.