Flats to condos: many lose their homes
What’s actually news here is that converting flats to condos has been forbidden in Montreal since 1975, because merely strolling around any neighbourhood with duplexes and triplexes will turn up “condo for sale” signs. Many tenants get displaced when these conversions occur, but there’s no political will to stop them.
Chris 11:53 on 2012/09/22 Permalink
There is will from Projet, not that they have power/jurisdiction.
There’s just no profit in being a landlord. One solution might be to allow them to increase rent more. Yes, poorer people will have to more somewhere cheaper, but that’s happening with the condo conversions, even more so.
Ephraim 17:12 on 2012/09/22 Permalink
It’s a silly moratorium in so many ways. Take a house that has never been divided and has six bedrooms, who are they supposed to sell the house to? How many people can afford a six bedroom home? How many people need a home with six bedrooms? This needs to be done rationally and a complete moratorium is as stupid as leaving it a free-for-all. Not to mention the legal problems from undivided co-properties.
Kate 12:51 on 2012/09/23 Permalink
Ephraim, most of the neighbourhoods touched by this phenomenon don’t have many houses as such, let alone mansions with 6 bedrooms. It’s about the Plateau mostly, and to a lesser extent Rosemont, Villeray, even Verdun, where a lot of duplex and triplex housing exists. We’re talking about selling off individual flats as condos, not subdividing big houses, which I don’t think happens here much, if at all. I’ve seen that in Toronto (where I was astounded to find that a friend’s expensive flat involved having the upstairs tenants walk through their living space to get to the stairs to their flat) but never here.
Ephraim 15:48 on 2012/09/23 Permalink
Kate, there are a lot of houses in the Plateau that are touched by this. Properties that are duplexes and triplexes are difficult for people to purchase, you still need the 20% down. Just to use as an example, MLS 8761360 at $945K, that means a down payment of $189K plus you need to be able to prove that you can carry the mortgage, etc. How many people have $189K in cash to buy a house? Add into this the complication that if you buy it after December, you likely won’t be able to live in it until a year and a half later (six months notice of the 1st of July). And if you can’t rent or someone runs out on you, you have to make up for the missing mortgage payment money. It’s complicated. Too complicated to simply boil it down by a moratorium. Where rents are paying enough you find that people even purchase condo properties to rent out, but our rents are often artificially low because of the rental board which leads to even more difficulty with getting a mortgage because the rents don’t cover enough of the mortgage.
steph 15:55 on 2012/09/23 Permalink
It sounds like you’re describing an inflated value to properties. I’m sure the fool who’s going to buy MLS 8761360 is going to expect to sell it in three years for 1.5million – and the spiral goes on until it busts.
Ephraim 18:04 on 2012/09/23 Permalink
Assuming you divide that in three, that’s $315K for an apartment, not that big a stretch for the Plateau, depending on the area.
But I just checked and my calculations are wrong, most banks will only lend 65%, leaving a down payment of 35% or CMHC insurance. So even if it’s $600K for a triplex, that means $210K down. (And $330K on the other listing). If you have good financials, you might be able to get 75%. You still have to show how you will cover the rest of the mortgage payment, house taxes, etc.
Nothing to do with inflated values…. or do you have $200K sitting around ready to buy a triplex? Divide it in three and you are talking about $66K down… yes a stretch, but not unimaginable. It’s a reality.
Even in Verdun, maybe $350K for a triplex, that’s $122K down. And we haven’t even started to talk about the income you will have to show the bank, etc.
ant6n 20:52 on 2012/09/23 Permalink
Is it normal that somebody’s selling at more than twice the evaluation?
To a renter like me, that sounds inflated somehow. Plus the listing for MLS 8761360 claims that there’s the potential to make 2500$/month in rent for the three apartments; if you assume 500$/month will get you a 100K mortgage, then the house shouldn’t be much more than 500K (no?), similar to the evaluation.
Ephraim 07:03 on 2012/09/24 Permalink
@and6n you can list for any price you want, doesn’t mean you will sell it. But that’s not the point, the point of the matter is that getting the down payment isn’t easy. I remember how I had to beg and borrow to get my original down payment and we still had to use CMHC and pay the CMHC premium, which added on to our costs. When an apartment is $200K that means you need $40K down or you have to pay CMHC.
Break it down… $40K down, welcome tax, notary and inspection. Then you have $750 a month in mortgage (25 year amortization), city property taxes, maintenance, etc. So, let’s say it’s $1000 a month. You need to have an income of $40K a year before taxes to qualify for the mortgage. Imagine a $600K apartment, it’s that… on steriods, because you need a larger down payment and while the bank will give you more money based on the leases, you end up responsible when your tenant doesn’t pay your rent, the apartment is empty or when your tenant clogs the toilet and floods the place. Sure, if your tenant doesn’t pay you can collect a judgement against them for 30 years, but you end up losing a day or two of salary to run down to the rental board, etc.
It’s not easy being a tenant and it’s not easy being a landlord and with bank money tight and house prices as they are, it’s tough to invest in an apartment. The moratorium makes things more difficult because it also limits who can afford to buy the buildings, especially larger blocks. Which is why you see REITs walking in. My point is that a blanket moratorium doesn’t work for anyone’s benefit. Doesn’t help get more apartments into the mix either.
ant6n 08:54 on 2012/09/24 Permalink
I get that point; I’m just wondering to what extend the situation is made worse by inflated prices on the buildings.
Ephraim 09:53 on 2012/09/24 Permalink
Prices aren’t that inflated in Montreal. For a long time the prices in Montreal were depressed because of the political situation. And are still more affordable than other Canadian cities. Prices go up and down a few percent from month to month, but it depends on where the sales are… houses might sell more toward the summer, while condos might be even all year long because of familes versus singles.
People can set any price they want, but the market usually works well enough that the property won’t sell. That’s why some properties are on the market for a year. If the price is right and negotiable, you should see properties sell in a few weeks.
City evaluations are almost useless and are often biased, even though they aren’t supposed to be. It would be better if they valued property by square foot, which would encourage people to keep their houses in the best shape possible. Currently the inspector can charge you more city tax if you have hardwood floors versus tile versus vinyl. But you can buy vinyl that is more expensive that laminate… it doesn’t make sense. There is no way to give an unbiased valuation, but should your good decor cost you money, consider that it moves with you?