Two Buildings Are Driving Down Condo Values By Over 20% in This Toronto Neighbourhood
While Toronto’s condo market remains hot throughout the city, with the average selling price for a unit currently sitting at $716,976, finding a condo selling below this seems like a dream. But in Little Portugal, units are selling well below the current average — driving down the neighbourhood’s average property values by a considerable amount.
A new report from Strata has revealed that condo units in the Little Portugal pocket were selling for an average of $582,000 (or 18.8% less than the current average) last month.
According to MLS data for the area (C01), 33 units sold in Little Portugal in May, with 13 of them selling well below the current average, while more than half of those transactions were concentrated in two buildings: 36 Lisgar Street and 68 Abell Street.
As a result, Sam Massoudi, real estate agent at Strata, says these sales drove down the neighbourhood average by over 20%.
“It’s really peculiar to see 1-bedrooms selling in the low $400s, considering the Toronto average for units this size are actually $560,000,” said Massoudi.
Strata says when 36 Lisgar and 68 Abell are removed from the MLS data search, the average sale price of a condo for May in Little Portugal jumps to $753,000.
“If those two buildings did not exist, Little Portugal would have some of the highest real estate values in the city. It would beat out neighbourhoods like High Park, Cabbagetown and Leaside, which sit at $700,000, $713,000, and $677,000, respectively,” reads the report.
Alex Hood, a realtor for Strata explained that 36 Lisgar and 68 Abell were originally introduced to the neighbourhood as a more “economical living situation” and the boutique features that many homebuyers typically look for don’t exist in either building.
“The finishes are of lower quality, the layouts are smaller, and they don’t have any unique character,” said Hood.
Hood also notes that a lot of the units, especially at 68 Abell, are purchased as investment properties and rented out to tenants, so they may not be as appealing to end-users.
“Both buildings also have a revolving door of inventory with units that stay on the market longer, and sell at about $900 per square foot… well below the average of $970 for Toronto’s west end,” said Hood.
While buying a condo well below the average might seem tempting to some buyers, it comes with risks.
Strata says these condominiums are on CMHC’s ‘blacklist,’ which Strata says means these properties “may carry serious financial risk to the homeowner” and therefore, “it will not insure a mortgage for units in that building.”
“Reasons can include poor maintenance, depleted reserve funds, or even lawsuits. So instead of just needing 5% down, homebuyers could be required to put down 20%,” explained mortgage broker Jason Armstrong to Strata.
But even with that much down, Armstrong warns you still may not be able to secure financing for some properties.
According to Strata, both 36 Lisgar and 68 Abell are built by the now-defunct developer Urbancorp, whose founder took on “such a risky debt load until the company eventually collapsed.”
STOREYS reached out to CMHC and learned that the term ‘blacklist’ is “not an official term or business practice CMHC uses for risk analysis in its mortgage loan insurance business.”
“CMHC’s role is to assess applications for mortgage loan insurance submitted by Approved Lenders (such as banks or credit unions), who arrange mortgage loans. Our mortgage loan insurance is provided to the lender, rather than the homeowner, and protects the lender in the event that a borrower is unable to make the required mortgage payments,” said Leonard Catling, CMHC’s senior officer of media relations.
“CMHC has an obligation to ensure that certain qualification requirements are met before issuing mortgage loan insurance. When reviewing mortgage loan insurance applications, we assess many factors, including the borrower’s credit history and individual financial circumstances, the performance of the marketplace in which the property is located, as well as the characteristics of the property being financed. The overall risk and suitability are determined through the assessment of these components,” explained Catling.
That said, if you do happen to stumble upon condos listed for incredibly low, Strata says to check over condo documents carefully and to look for upcoming required repairs that would indicate a poor quality build.