Multi-family construction in Calgary is booming with starts last month posting a 397.2 per cent year-over-year increase to 1,780 units. Of those 1,780 starts, 1,410 were apartments, bringing the total number of apartment starts to 4,010 to the end of June and the number under construction to almost 7,000.
That means there are going to be a lot of units for sale in the next couple years and I wanted to share an experience that will help educate buyers of new condos.
Another Calgary REALTOR® recently related this story:
“A client of mine just called to inform me that the brand new condo I sold her (that she has been in for 6 months) will need an increase in the condo fee by 60% to fund the budget that was estimated at almost 70% under the actual costs. The owners will also need a cash call of approximate $1,200 per unit to catch up to the current expenses. Did I mention that this building is 6 months old!! She would never have purchased the unit of she knew the condo fees would be in the mid to high $400 range. The builder has built many similar developments and should have a better idea of the cost to operate these buildings.”
Sadly, this isn’t just a one-off. The budget and condo fees marketed by some developers are oftentimes woefully low. I liken it to car commercials that brag about their model getting a certain gas mileage. Have you ever had a vehicle that came close to attaining the specs advertised? Likewise, there’s a chance that the promotional fees and budget forecast isn’t going to be enough to run the condominium once it’s built.
Calgary real estate lawyer Lou Pesta with Walsh LLP has this tip:
“Unfortunately this is a fairly common occurrence with new condominium developments (to a greater or lesser extent)…In advising buyers of new condominiums it would be wise to advise them that the budget is likely to be understated and final numbers will not be known until the owners take over the management of the complex and determine what level of services they would like.”