It’s not a “What if?” scenario — it’s already happening. And condo owners need to know big building costs are coming. realestatenews realestate
11:24 AM Jul 15, 2022
Two: Even if they did have enough cash based on past projections, construction inflation has thrown those numbers out the window.Auditor General of Ontario reportWhen these gaps were corrected, condo owners had to increase their reserve fund contributions — part of their regular condo fees — by an average of 50%. In one extreme example, owners had to pay 258% more.
“So typically, an engineer preparing [a reserve fund study] might have assumed a 3 per cent inflation increase over time, which has been generally true for construction inflation for a long time,” McNally says. “And now, with [construction] inflation jumping up 35% in an 18-month period, if [condos were ready to start a project] and they thought they have the money — they no longer do.”
“Anybody who’s been more conservative can accommodate these pressures a little bit better,” he says, “but certainly, everybody’s going to have to deal with the inflationary forces that has shown up here in the construction market.”leading the Condominium Law Group, has seen the worst of the worst. “There are some buildings that are beautifully run, and their reserve funds are huge — and generally they’ll be fine,” Conant says. “So I don’t want anybody to think it’s every single corporation. But is there a crisis in the industry? Generally? Absolutely.”
And in particularly dire situations, if an owner wants to sell their way out, a mortgage might not be available to the buyer.
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