Canada condo boom rolls on as buildings fall apart
By Andrea Hopkins
TORONTO (Reuters) - While Toronto's housing boom rolls on, some of the housing itself is falling apart.
Canada's biggest city has more than 100,000 units under construction as developers and investors seek to cash in on condo prices that are up 25.7 percent in the city over the past five years. The trouble is, many buildings are so poorly constructed that some residents fear that the money-spinners of today could become the slums of the future.
Glass panels have been falling off newly built Toronto condos, including the luxury Shangri-La and Trump towers and a dozen or more lesser-known buildings across the city. New buildings suffer from water leaks and poor insulation, making them ill-suited to Canadian weather.
"Many buildings that went up during the beginning of this condo boom are already facing high repair costs, and in many cases lawsuits, because they are built so shabbily," said Ted Kesik, a professor of building science at the University of Toronto.
"The life cycle is clear. They are okay for the first five years, they gradually deteriorate by year 10 ... and don't even reach year 20 before significant remedial work needs to be done. In 50 years these buildings may well become an urban slum."
That's all far in the future for builders and investors who have had little trouble finding tenants, with the city's rental vacancy rate at 1.8 percent. Condo prices are rising across the country, up 16.8 percent in the last five years, according to the Canadian Real Estate Association.
Real estate brokers are dealing mostly with 10-year investors who want to buy from a blueprint, double their equity during the five years of construction, and enjoy rental income and price appreciation for five more years before selling and investing again elsewhere.
"It's all about timing. We advise most clients to get out before that five-year mark," said Roy Bhandari of Sage Real Estate, which notched nearly C$50 million in Toronto condo sales in 2013, with clients typically from China, Eastern Europe, or the Middle East. "It's the magic number because after five years the warranties are expired." Continued...