A new 10-year study debunks the myths about condo maintenance fees, offering investors a clearer picture of this lucrative investment option.
But one condo expert says investors should not base their buying decisions by solely comparing the average maintenance fees from building to building.
“Though this may be helpful, it’s important to delve deeper and look at the trends,” advised Freedom Malhotra, a sales representative at Kingsway Real Estate Brokerage and founder of Condo Planet.
“How much has the maintenance fees in a particular building gone up over the years? If there have been significant hikes in fees, this may be an indication of mechanical and structural defects, or a mismanagement of reserve funds. Ultimately, every building is unique and a savvy buyer needs to weigh out all the variables.”
The study, published by Condos.ca this week, collected MLS sales figures for Toronto condos from the past decade.
It confirmed a number of long-held beliefs about condo maintenance fees, including the more amenities, the higher the fees.
“But the ‘worst offenders’ were not the obvious ones,” according to the report. “Pools, for example, only affected fees, on average, by $0.03 per square foot.
“It revealed a number of other surprises, including the true cost of parking and the fact that older doesn’t necessarily mean more expensive when it comes to maintenance.”
One surprising finding from the study was that older buildings don’t typically have higher maintenance fees per square foot, despite this being a widely-held belief among buyers and industry professionals.
In fact, the study found that the average fee of a condo that is around 40 years old is $0.57 per square foot, the same average fee as a five or 10-year-old building.
“I am shocked that older buildings are averaging $0.57 per square foot,” said Matt Elkind, a sales representative at The Condo Store. “That seems very low to me.”
The report believes this myth was established because the absolute numbers are often higher with older buildings because units tend to be larger.
It added: “The study reveals no discernable correlation between age of building and maintenance fees and, in fact, there are numerous buildings 20-years plus in age with maintenance fees priced below average for the City.”
Malhotra said: “It is great to know that the older condos with seemingly higher maintenance fees are actually comparable to new condos when you break things down on a dollar per square foot basis.”
The report also found that very few buildings have flat fees for maintenance, but that fees actually increase in correlation to unit size.
“From a total monthly expenditures standpoint, that’s often true,” stated the report. “But not on a price per square footage basis, which is the only way to objectively compare buildings.”
Malhotra advised that investors and buyers be careful about the conclusions drawn from these statistics.
“For example, though having a second parking space will add to one’s maintenance fees, it’s not true that buyers are paying $30,000 or $50,000 more for those second parking spaces with respect to the resale market,” he said.
“From my study of what has sold in Mississauga over the past few years, condos with two parking spaces have sold at prices equivalent and even less than those condos with one parking space.
“This usually shocks investors who have paid huge premiums from the builder when buying a brand new pre-construction condo from a sales office.”
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