Unique numbers and interesting facts blasted maintenance fee’s myth

unique-numbers-and-interesting-facts-blasted-the-previous-myth-about-maintenance-fee-v2

Some unique numbers and interesting facts about Condos maintenance fee in Toronto and North York that blasted the previous myth about maintenance fee

It is usual Condo owners understanding that the lower maintenance fee attracts Condo buyers and drives Condo market price up. But analysis of 635 buildings of Toronto and North York shown an opposite trend. What does it mean? And what are the main factors that mostly influence maintenance fee?

As we already discussed earlier, there might be a big difference in rental income and Condo maintenance fee depending on the buyer’s Condo building choice. And we discussed that the main influencing factors of a rental property income is its maintenance fee. Past researches confirmed that the most influencing factors driving maintenance fee up and down are building age, amenities and inclusions, quantity of units, location and possible litigations. Almost all listed factors are reasonably expected to be influencing but location is questionable.

1. Location

Based on Canada Mortgage and Housing Corporation (CMHC) research as of March 6, 2017 referring to CMHC Data 2011 year “In 2011, condominium fees varied substantially across provinces within each structural type of dwelling. Ontarians paid the highest condominium fees in 2011 when compared to residents of other Canadian provinces, whereas fee payers residing in Quebec generally paid the lowest; this was the case for all dwelling types except row houses.

Average monthly condominium fees, by province and structural type of dwelling, 2011: 

average-monthly-condominium-fees-by-province-and-structural-type-of-dwelling-2011

Condo-benchmarking team is trying to clarify the situation of 2019 -2020 years in the course of our current researches to understand the reason of such big difference in maintenance fee of condominiums located in Ontario and Toronto particularly comparing with other big cities such as Vancouver and Montreal. Certainly, there is a different level of salary between Quebec and Ontario. Salary is the biggest part of Condo service price. But based on Canadian government statistics, it is about 10 % difference in levels of salary between Ontario and Quebec but according to the Chart above, Ontario maintenance fee in high-rise buildings in 2011 was about 77 % higher than in Quebec

  • about $530 in Ontario and
  • $300 – in Quebec.

So, the difference of maintenance fee levels between Ontario and other Canadian provinces are unreasonable and unjustified and Condo-benchmarking team will continue researches to investigate how such situation might be managed by condo owners.

2. Amenities and inclusions

We analyzed 635 Toronto high – rise (5 floors and higher) Condo buildings. 5 group of Condo buildings (based on main influencing amenities and inclusions such as a pool and hydro and heat) have been created to analyse influencing factors behaviour in those groups:

Y Y Y – Condo buildings that have a pool (Y), hydro (Y) and heat (Y) are included in the bill,
N N N – Condo buildings that do not have a pool (N), No hydro (N) and No heat (N) are included in the bill,
N Y Y – Condo buildings that do not have a pool (N), hydro (Y) and heat (Y) are included in the bill,
Y N N – Condo buildings that have a pool (Y), No hydro (N) and No heat (N) are included in the bill;
All – All Condos.

The big part of buildings (~50%) are “others” – the buildings that have different combinations such as pool+hydro included, heat is not included, or pool +heat included, hydro not included etc that do not fall into any of previous 4 groups.

Building distribution based on maintenance fee level shown on the graphs 1-6 and table 1:

Please click arrow below to graphs by groups.
And click arrows above of graphs to see each group graph.​

Please click arrow below to graphs by groups.
And click arrows above of graphs to see each group graph.​

Min, Max, Average, Median levels of maintenance fee by groups of buildings represented clearly on the graph 7:

As we can see, there is the smallest difference between 5 groups of buildings belongs to Y N N group (buildings with a pool, no hydro, no heat included in the maintenance bill). It means that there are less opportunities to decrease manage maintenance fee. But regarding other groups, there are big differences between Min and Max that justified some amenities not taken into account, some luxury services and also, there might be opportunities to decrease maintenance fee.

Average and Median of maintenance fee of different group of buildings (based on main amenities and inclusions) represented in the table 2:

The table shows that the lowest level of maintenance fee ($0.5 and less) have 21 % buildings of N N N group (No pool, No hydro, No heat). But the most of that group’s buildings (52%) have maintenance fee higher $0.5 and less or equal $0.7 and 24 % buildings have maintenance fee between $0.7 – $1.0 /SF/month and that group even has building of the highest maintenance fee level category. Naturally, those buildings should have maintenance fee lover the average – $0.7/SF because the most expensive amenities and inclusions are absent. But in some of the buildings that category a high maintenance fee might be justified by luxurious services. It might be identified with deeper analyses.
We can see that:

  • 52% buildings have level of maintenance fee higher than $0.5 and less and equal $0.7
  • 6 % – $0.5 and less
  • 38 % – between $0.7 and $1.0
  • 4 % – $1.0 and higher

 

Five graphs # 8 show that the generally, maintenance fee increases as quantity of units increases. It is valid for all groups except Y Y Y and N N N which shows different trend. Maintenance Fee per SF increase with quantity of units increase. It might be justified extra amenities that might be more expensive to maintain and other factors that have not been taken into account. Also, it might be considered a sign that expenses are not controllable.

Please click arrow below to graphs by groups.
And click arrows above of graphs to see each group graph.​

3. Relation between Maintenance Fee and Quantity of Units

Five graphs # 8 show that the generally, maintenance fee increases as quantity of units increases. It is valid for all groups except Y Y Y and N N N which shows different trend. Maintenance Fee per SF increase with quantity of units increase. It might be justified extra amenities that might be more expensive to maintain and other factors that have not been taken into account. Also, it might be considered a sign that expenses are not controllable.

4. Relation between Condo Maintenance Fee and its Age

Graph 10 shows us that maintenance fee increases with the age for almost all group of buildings except N N N and N Y Y which shows opposite tendency.
Also, the table shows maintenance fee growth until 26-35 years and decreases after that age probably because that age category of buildings does not have expensive amenities or those amenities are not maintained as in the past.

Please click arrow below to graphs by groups.
And click arrows above of graphs to see each group graph.​

5. Relation between Condo Maintenance Fee and its Market Value

Based on graphs and table above we can conclude that: 

Generally, for all the buildings the Set of Amenities and influence Maintenance Fee directly but not significantly. Table 2 shows that the Average and Median maintenance fee levels of different groups of buildings is approximately the same and does not depends on such facility as a pool and does not depends on “Hydro” and “Heat” inclusions in the owner’s bill.

Generally, the level of maintenance fee tends to be lower if the Number of units are higher for category of buildings “No pool, No hydro, No heat” included and for “Yes poo, No Hydro, No Heat” are included. Which makes sense.

But for categories “Yes pool, Yes hydro, yes heat” and for “No pool, No hydro, No heat” included the maintenance fee grows up with quantity of units increase. This is unusual situation and needs to be clarified.

The Age of the building influences directly except just two categories of buildings: “No poo, No hydro, No heat” included and “No pool, Yes hydro, Yes heat” included which show that maintenance fee decreases with the age.

 

The current analyses blast the earlier myth about market price and maintenance fee relations that said:”The lower maintenance fee drives a property market price up” but based on our research the graphs and tables shows that Market price influences Maintenance Fee directly for all categories of the building and show clearly the maintenance fee increase the same degree as a property market value increases. 

 

Below, 5 graphs # 9 shows direct relation between maintenance fee and a property market price clearly, the higher market value the higher maintenance fee that bursts the previous myth that “the lower condo maintenance fee the higher market value of the property”. What might that tendency mean? Some possible reasons might be:

  • Highly-priced services in luxurious buildings drive maintenance fee up.
  • No, or weak Condo directors and owners control. Some owners of expensive properties do not have a time or wish to be involved into Condo cost monitoring or management.
  • Not effective condo management practice. It might be because of implicit or explicit conflict of interest and/or lack of expertise of Condo directors.
  • Some extra-ordinary Condominiums fall out of trend showing a very high market price and a modest maintenance fee. Such buildings as the Berczy ($1458 /SF has maintenance fee just $0.56/SF, Burano on Bay ($1,183/SF and $0.56/SF), Pears on Avenue Rd ($1,122 and $0.67) and Minto 775 ($982 and $0.41/SF). The Table 1 (example of high demanded buildings with high rental and sale price and a great choice of amenities) shows that Condos having similar set of amenities and a high quality of services have very different maintenance fee that might change opportunity for Rental Income dramatically. Also, the table confirms that the most maintenance fee influencing factor is the highest professionalism and efficient work of management company and a great job of the Board Directors. So, a potential condo buyer should not neglect those factors making a choice of a Condo for living or for rental income.

www.condo-benchmarking.ca

Make a right decision!

Leave a Reply

Your email address will not be published. Required fields are marked *