Maintenance fee hikes for Toronto condos slowed last year: Study
While buyers and residents remain leery of increasing maintenance rates, monthly fees in Toronto rose only 2.5 per cent in 2017 over the previous year, according to Condos.ca.
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It’s big and it’s real — condo buyers’ and residents’ fear of escalating monthly maintenance fees.
But a study by Condos.ca shows condo fees in Toronto rose only 2.5 per cent last year over 2016. The average maintenance cost on a 594 sq. ft., one-bedroom apartment was $386.60.
That compares to an annual increase in both 2016 and 2015 of about 4 per cent.
Condos.ca found that the average fee among 984 buildings last year was 65 cents per sq. ft. That equates to $628.02 a month on a 956 sq. ft. two-bedroom unit and $881.20 a month on a 1,354 sq. ft., three-bedroom apartment.
Those averages don’t include parking or storage lockers, which would up the monthly cost by $46.22 and $15.15 a month, respectively, says the study.
Buildings that included water, heat, hydro and air conditioning in their fees averaged 69 cents per sq. ft. Those without the utilities had a 37 cents per sq. ft. average fee.
“If you’re paying for these elements separately, the total monthly costs could be much higher than if they were included in the maintenance fees,” says the report.
Last year’s lower increase is probably due to the number of new condos on the market. Newer buildings tend to have lower fees, says Andrew Harrild, company co-founder. (Pre-construction condos were not included in the study.)
It doesn’t reduce the dread he hears every day from buyers who don’t want to pay that monthly fee.
“After your mortgage, it’s typically your next biggest expense. It’s a big issue,” he said.
But it doesn’t need to be scary.
“When done right (the fees) are definitely an important part of a healthy condo building. They’re an important part of ensuring your asset is going to grow in value in time,” said Harrild.
“There are some great buildings out there that have been around for 20 or 30 years and still have maintenance fees under control,” he said.
The maintenance costs should rise annually at about the rate of inflation, but they should also reflect the true cost of operating and maintaining a building.
A lot of buyers look for lower maintenance fees so they can allocate more of their budget to their mortgage. But in some cases the cost of a unit may be discounted because the maintenance fees are higher.
“Buildings with higher maintenance fees don’t often sell for the same price per square foot. You have to do the math,” said Harrild.
The average price of a new construction condo in the Toronto area last year rose 42.6 per cent to $702,992, from $493,137 at the end of 2016, according to the Building Industry and Land Development Association (BILD).
The province also introduced new rules last year that require condo board members to take online training in areas such as avoiding conflicts of interest in purchasing decisions. Ontario also launched a new online tribunal to deal with condo disputes and new rules around mandatory meeting notices, voting and disclosures.
Those changes were expected to add $12 a year to the fees per condo unit, the government said in July.
Harrild advises buyers to always bear in mind the true cost of operating the building.
Good condo managers will make sure the reserve is healthy enough to fund major repairs so that residents aren’t hit with expensive special assessments down the line.
Sometimes condo boards will opt for higher fees for the first few years of a building’s life to build up a healthy reserve fund and then they will be able to reduce the costs for unit owners. The Toy Factory Lofts decreased fees 30 per cent between 2011 and 2012. Success Tower, reduced its fees 13 per cent from 2015 to 2016 and Minto 775 saw a drop of 19 per cent between 2015 and 2017.
At the Toy Factory, the board went through every line of the budget and cut costs wherever possible, right down to more energy efficient lighting and lowering the thermostat a couple of degrees in common areas where possible, said Harrild.
Size of building can matter too, when it comes to condo fees. If two buildings have a similar footprint, repairing the roof will likely cost about the same whether one has 40 or 14 storeys.
But the cost of repairing and maintaining common elements indoors can be distributed among more residents if there are more units. At the same time, those common features are probably going to experience more wear and tear in a bigger building simply because more people are using them.