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The condominium experience in British Columbia Eadie, Graeme McAllister 1977-02-22

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THE CONDOMINIUM EXPERIENCE IN BRITISH COLUMBIA by GRAEME MCALLISTER EADIE B. Comm., University of British Columbia, 19 76 A Thesis Submitted in Partial Fulfillment of The Requirements for the Degree of Master of Science in Business Administration in The Faculty of Graduate Studies (Commerce and Business Administration) We accept this thesis as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA February, 19 7 8 © Graeme McAllister Eadie, 19 7 8 In presenting this thesis in partial fulfilment of the requirements for an advanced degree at the University of British Columbia, I agree that the Library shall make it freely available for reference and study. I further agree that permission for extensive copying of this thesis for scholarly purposes may be granted by "the Head of my depart ment or his representative. It is understood that copying or publication of this thesis for financial gain shall not be allowed without my written permission. Abstract The overall objective of this study was to investigate the condominium market in British Columbia with special emphasis on the metropolitan Vancouver and Victoria areas. Specifically there were four main .goals: 1) to quantify the amounts, type, and timing of condominium developments, 2) to establish a pro file of condominium occupants including their socio-demographic characteristics, motivations for purchase, and their level of satisfaction with the concepts, 3) to investigate the developers of condominiums for the purpose of defining characteristics of this sector of the market and its participants, finally 4) to examine the administration and management of completed condo minium projects. Several unique situations and unusual problems pertaining to condominiums were also examined. All of the data necessary to quantify the condominium market was available in the Land Registry Offices, Included in the records were the number of strata projects, number of strata units, date of registration, location, use, structure type, and the name of the developer. Transaction data concerning condo miniums was also collected at the Land Registry Offices; this formed part of the data needed to construct the resale price index. The quantitative data, described above, also served as the basis for the occupants and the developers surveys. The condominium market was found to have grown rapidly since its inception in 1968. As of November 30, 1977 a total of 2340 condominium projects involving 46,411 units had been registered in the province. Of these 94.8% of the projects and 94.0% of the units were strictly residential. This represents a signifi cant force in the housing market as condominiums in 1976 accoun ted for 26.2% of all housing starts and 57.9% of all multi-unit housing starts in the province. Geographically the condominiums were concentrated in metropolitan Vancouver (65.6% of all units) and metropolitan Victoria (11.9% of all units). The largest single structural category was duplex projects (42.3% of all projects and 4.2% of all units) followed by lowrise apartments (under 4 stories) which accounted for 21.7% of all projects (36.0% of all units). Overall residential condominium prices have risen by approxi mately 150% between 1969 and 1977 in metropolitan Vancouver and Victoria although those units purchased from 197 4 on have shown little or no gain on resale. Condominium units have kept pace with rate of increase of single family detached house prices. One hundred and fifty-seven projects of 10 units and greater were randomly selected in metropolitan Vancouver and Victoria. Every eighth unit within these projects was distributed; an owners and a tenants survey - 895 units were thus canvased resulting in 234 completed and returned questionnaires. From these, three submarkets within the condominium market were identified: a) young, apartment condominium purchasers, generally without children. They purchased a unit primarily to establish an equity position in the housing market; b) townhouse purchasers who were predominantly in the 30-3 year old age category and had the highest average numbe of children; c) the older (over 40 years old) apartment purchasers who moved from . single family detached dwellings to escape the required upkeep. The owners survey also revealed that the two most frequently mentioned reasons for purchasing a condominium rather than a single family house were first, the economic advantage (46%) and second, the freedom of exterior upkeep (28%). Further it was found that overall there was a high level of satisfaction, with condominium living. Eighty-eight percent of the respond ents reported to be moderately or very well satisfied. The condominium development industry was found to be made up of a large number of participants (1261). The majority of these (90%) produced only one or two projects each, however there were also a small number of firms that were large pro ducers both in terms of units and projects. The largest twenty producers in terms of production of units concentrated, their activity in metropolitan Vancouver, these firms contri buted one half of the units in this region. The management of strata council budgets, in terms of both operating and reserve accounts, has improved greatly in the recent past. Less than 9 percent of surveyed projects had operating budget deficiencies, compared to approximately one half of the projects surveyed in 1973. V The condominium market is currently experiencing very soft market conditions. This is evidenced by the minimal price appreciation displayed recently, large vacant stocks of unoc cupied units (1638 in June of 1977 in metropolitan Vancouver) and the reduction in the level of new condominium construction relative to 1976. Despite these negative aspects the broaden ing of the consumer market to include all age groups and the high level of satisfaction displayed in the owners survey indicates the condominium market will remain viable in the long-run. The short-run outlook must remain cloudy however until the present unsold inventory is reduced. vi Table of Contents • PAGE List of Tables List of Diagrams List of Exhibits Acknowledgements Chapter One - Introduction 2. Chapter Two - Statistical Profile of Condominium Developments in British Columbia. 5. 2 .1 History of Condominiums 5. 2 .2 Sources of Data and Methodology 6. 2 .3 Condominium Developments 8. 2 .3.1 Condominium Development - Type of Project 12. 2 .3.2 Condominium Development - Size of Project I7-2 .4 Condominium Development as a Proportion of the Housing Market 25. 2 .5 Condominium Sale Prices •38. 2 .6 Current Situation Footnotes Chapter Three - British Columbia Strata Titles Act 46. 48. 49. 3 .1 Introduction 49. 3 .2 General Concept 49. 3 .3 Definitions 51. 3 .4 Creation of a Strata Plan 52. 3 .5 Owner-Developer 55. 3 • 6 Strata Corporation (Operation and Management) 58. 3 .7 Owner-Purchaser Footnotes 63. 69. PAGE Chapter Four - Owners' and Tenants' Profile ' 71. 4.1 Introduction 714.2 Previous Studies of Condominium Owners 72. 4.3 Sampling Process 764.4 Condominium Owners' Profile 78. 4.4(a) General Characteristics of Survey Respondents 78. 4.4(b) Socio-Economic Variables of Respondents 81. 4.4 (c) Age 814.4(d) Number of Children 81. 4.4(e) Education and Occupation 864.4(f) Income Distributions 86. 4.4(g) Two Wage Earner Households 924.4(h) Structure Type 95. 4.4 (i) Previous Tenure 964.4 (j) Loan-To-Value Ratios and Total Monthly Payments 103. 4.4 (k) Future Intentions 1034.4(1) Summary Profile 107. 4.5 Discriminant Analysis 1134.6 Conclusion: Discriminant Analysis 120. 4.7 Motivation for Purchasing a Condominium 120. 4.8 Condominium Verses Single Detached House 121. 4.9 Important Features of the Unit Purchased 123. 4.10 Level of Satisfaction for Condominium Owners 136. 4.11 General Level of Satisfaction of Owners 139. 4.12 Specific Problem Areas in Condominiums 142. 4.13 Reaction of Condominium Owners to Tenants 144. 4.14 Specific Criticisms Concerning Condominiums 145. viii • PAGE 4 .15 Tenants' Profile 148. 4 .16 Conclusion 149. Footnotes 150. Chapter Five - Condominium Development and Management 152. 5 .1 Introduction 152. 5 .2 Data Collection and Sample Size - Developers 152. 5 .3. 1 Developers' Activities 154. 5 .3. 2 The Top Twenty 157. 5 .3. 3 Small Development Firms 163. 5 .3. 4 Developers* Activity Over Time 166. 5 .3. 5 Developers of Unique Projects 166. 5 .4. 1 Developers' Characteristics: The Survey 171. 5 .4. 2 Developers' Involvement in the Condominium Market 172. 5 .4. 3 Project Financing 175. 5 .5. 4 Development Process 177. 5 .4. 5 Condominium Management by Developers 183. 5 .4. 6 The Present Situation and Future Expectations 185. 5 .5. 1 Condominium Management 187. 5 .5. 2 Data Collection and Sample Size 189. 5 .5. 3 Management Firms 191. 5 .5. 4 Management of Projects 193. a) Budgets b) Major Problems c) By-law Enforcement Footnotes 202. PAGE Chapter Six - Condominiums: Unique Features and Special Considerations 204. 6 .1 Taxation of Condominiums a) Real Property Taxation b) Income Tax-Owners c) Income Tax-Investors d) Income Tax-Developers 204. 6 .2 Conversion of Rental Apartments to Condominiums 212. 6 .3 Support Structures 213. 6 .4 Non-Residential Condominiums 217. 6 .5 Common Area Charges 224. 6 .6 Government Involvement in Condominium Financing Footnotes Chapter Seven - Conclusions Bibliography Appendixes 228. 233. 235. 240. 1. Synopsis of Previous Studies 242. 2. Owner's Questionnaire 245. 3. Tenant's Questionnaire 259. 4. Developer's Questionnaire 264. 5. Manager's Questionnaire 273. 6. Strata Council Questionnaire 279. X List of Tables PAGE 1. Condominium Projects By Year and Location: 9# Province of British Columbia 2. Summary of Condominium Projects 11. 3. Provincial Condominium Projects by Year and Type 2.3. 4. Condominiums by Type and Major Location, 1967-1977 16. 5. Condominium Projects by Project Size and Year ig. 6. Percent of Condominium Projects by Size 20. 7. Condominium Development by Type of Development and 22. Size of Project 8. Average Project Size by Year and Location 24. 9. Housing Starts - Province of British Columbia 27. 10. Housing Starts - Vancouver Metropolitan Area' 28. 11. Housing Starts - Victoria Metropolitan Area 29. 12. Housing Starts - Non-Metropolitan Areas 31. 13. Change in British Columbia Population by Age Group 33. 14. British Columbia Population By Age Group 34. 15. Condominium Average Selling Prices 4016. Percentage Increases in Resale Prices 45M 17. Distribution of Ages of Household Heads 75. (Hamilton and Roberts) 18- Basic Structural and Occupancy Data of 80. Surveyed Units 19. Correlation Between Household Size and 82. Number of Bedrooms 20. Profile of Condominium Purchasers by 83. Age Groups 21. Basic Demographic and Economic Data- 85. By Structure Type 22. Comparative Age Distributions - 88. Hamilton and Roberts VS. 1977 Study xi 23. Comparative Total Family Incomes -Hamilton and Roberts, CMHC, and 1977 Study 24. Distribution of Working Spouses (At time of purchase) 25. Distribution of Previous Tenure Type by Present Structural Type 26. Distribution of Previous Tenure Type by Age Group 27. Distribution of Previous Tenure Type by Price of Unit 28. Distribution of Previous Tenure by Loan-to-Value Ratio 29. Reason for Moving by Previous Tenure Type - First reason only 30. Reason for Moving by Age Group -Total Number of Reasons 31. Reasons for Moving by Structure Type - Total Responses 32. Distribution of Loan-to-Value Ratio by Age Group 33. Distribution of Loan-to-Value Ratio by Structure Type 34. Distribution of Total Monthly Payments by Age Group 35. Future Housing Intentions 36. Choice of Next Structural Type by Age Group - For those who Intend to Move 37. Profile of Condominium Purchasers/ Discriminate Analysis Variables 38. Number of Cases Classified into Each Group 39. Those who considered Single Detached House Prior to Purchase of Condominium by Present Structure Type xii PAGE 40. Those who considered Single Detached House 124. Prior to Purchase of a Condominium - by Previous Structure type 41. Reason for Purchasing a Condominium 125. over a Single Detached House - by Structure Type (Total Reasons) 42. Important Locational Features of the 129. Unit by Structure Type (Total Choices) 43. Important Features of the Unit by 130. Structure Type (Total Choices) 44. Frequency of Desired Changes in the 132. Unit by Structure Type 45. Important Features of the Project by 13 3. Structure Type (Total Choices) 46. Frequency of Desired Changes in the 135. Project by Structure Type 47. Most Important Reason for the 137. Selection of the Units 48. Frequency of Unused Sales Attractions 138. by Structure Type 49. Extent of Purchaser's Knowledge by 140. Method of Purchase 50. Extent of Purchaser's Knowledge by 143. the Level of Satisfaction 51. Most important Criticisms of Condominiums 146, 52. Most Important Criticism by Structure 147. Type - First Mentioned 53. Developer's Activity - Province 155. 54. Developer Activity by Region 15 8. 55. Percentage of Development - Top 20 Developers 159. in Terms of Units 56. Percentage of Development - Top 20 Developers 161. in Terms of Projects 57. Top Twenty Developers in Terms of Average Project 162. Size xiii PAGE 58. Percentage of Development Activity by Area - 164. Top Twenty Firms in Terms of Units 59. Developer's Activity by Year and Size 167. 60. Size Distribution of Developer's Activity by Year 169. 61. Percentage of Income Derived from Condominium 17 3. Development 62. Most Important Areas of Revenue for Condominium 174. Developers 63. Source of Financing by Type and Developer's Size 176. 64. Average Development Period (Months) 178. 65. Method of Development 18166. Developers' Perception of Consumer Preference 182. 67. Developer Involvement in Condominium Management 184. 68. Developers Having Unsold Units Which are Vacant 186. or Rented 69. Development Firms with Projects in the Planning 188. Stages 70. Ranking Most Significant Management Problems by 196. Management Firms 71. Ranking of Most Significant Management Problems 197. by Strata Councils 72. Ranking of Methods Used to Enforce By-laws 200. - Strata Councils - Management Firms 73. Conversions to Condominium: British Columbia 214. 74. Support Structure Condominiums in British 216. Columbia 75. Completely Non-Residential Condominium Projects 218. in British Columbia 76. Percentage Distribution of 1977 Common Area Charges 226. by Structure Type (Metropolitan Vancouver and Victoria) 77. N.H.A. and CM.H.C. Involvement in Condominium 229. Financing (1967 to 1976). xiv List of Diagrams PAGE 1. Distribution of Number of Children in Households 2. Distribution of Previous Tenure 3. Reason for Purchasing a Condominium Rather : 126. Than a Single Detached House 4. Manager's Prior Experience 192. 87. 99. XV List of Exhibits PAGE 1. Results of Discriminant Analysis 119. 2. Comparison of the Leasing and Purchasing 222. Cost of a Warehouse Condominium. v. xvi Acknowledgements This study is dependant on an extensive amount of primary data of which there were many contributors. The author would like to thank all those who responded to the occupants, managers, strata councils, and developers questionnaires without which much of this study would not have been possible. Further data was collected with the generous assistance from the Minister of Municipal Affairs and Housing, province of British Columbia, Registrars in each Land Registry Office throughout the Province and the British Columbia office of Central Mortgage and Housing Corporation. Thanks is extended to Mrs. A. Wicks, Mr. J.N. Brampton and Mr. K. Johnson for their assistance in administer ing the questionnaires, the collection of the data from the Land Registry Offices and the preparation of the data. I would also like to express my appreciation and gratitude to the British Columbia Real Estate Association and their special Strata Titles Committee (A.L. Andrews, R.J. Burns, P. Watkinson, J.G. Dennis, D. 0'Brian and L.K. Sully) for their financial support and for their assistance in arranging appointments throughout the province. Finally, very special thanks is extended to Mr. D. Baxter for his significant contribution to the preparation of the primary data and to Dr. S.W. Hamilton for his guidance throughout this study. Introduction Strata title projects, or condominiums as they are more commonly referred to, are a relatively new form of property ownership in British Columbia; the first project being built in 1968. The definition of the condominium concept is "one overall area having within its boundaries certain parts owned in fee simple by individual owners and other areas owned by all the individual owners as tenants in common."* This form of tenure may be applied to any use from residential to mixed residential, commercial, industrial, or recreational. Similarly the form the projects take may range from land sub divisions to multi-story highrise buildings. The enabling legislations providing for the development of condominiums has been in effect in British Columbia since 2 September, 1, 1966. Initially the, rate of. development was slow as the concept was not fully understood by the public. No strata projects were constructed until 1968 when 7 projects involving 312 units were produced. The rate of production has increased greatly since then culminating in 667 projects invol ving 11,052 units being built in 1976. Over the period 1968 to November 31, 1977, a total of 46,411 condominium units have been created involving 2340 projects. With their increasing number, condominiums have become a significant force in the housing market. As a proportion of new housing starts in the province they have increased from 1.2% in 1968 to 26.2% in 1976. As a share of the new starts intended for owner-occupiers they have increased from 2.2% to 32.0% over the same period. This study divides the examination of the condominium market into five basic components represented by the following chapters. Chapter Two presents a statistical profile of the market including the quantity, type, location, and size of condominium developments and information on their selling prices. Chapter Three reviews the Strata Titles Act as it presently applies, some of the major amendments that have been made since its introduction, and some of the proposed changes in the Act. The Fourth Chapter represents a major portion of this study. It discusses the results of a survey of condo minium owners and tenants which establishes a profile of the occupants including socio-demographic characteristics, motiva tions for purchase, and the owner's satisfaction with condo miniums. The next chapter is concerned with the developers of condominiums and" those charged" with their administration and management on completion - the professional property mana gers and the strata councils. Chapter Six examines some special considerations and unique projects. Finally, Chapter Seven provides some concluding remarks. It should be noted before proceeding further that the term "condominium" is not contained in the British Columbia legisla-tion. Rather, the term "strata" has been adopted from the New South Wales Strata Titles Act from which the B.C. Act was modeled. Throughout this report however, the terms "condominium and "strata" are used interchangeably to reflect the general usage of the public. The following general definitions are provided to assist the readers who are unfamiliar with the terminology associated with condominiums. For greater detail and more specific defi nitions the readers are referred to Chapter Three. Strata Plan or Condominium Plan: This refers to the document that is registered at the local Land Registry Office to create the legal interest in real property that are known as strata units or condominium units. Until this plan is accepted for registration in the Land Registry Office, no strata or condominium units exist. Strata Project or Condominium Project: This is a rather loose definition used in the industry to describe the project developed under the Strata Titles Act. Generally this is identical to the project described in the strata plan except in the case of phased condominiums where each phase is called a project but one strata plan covers all phases. Strata Unit (lot) or Condominium Unit (lot): This refers to the individual units which are created by the registra tion of the strata plan. The size and boundaries of these individual units are specified in. the strata plan and at the time the strata plan is filed, individual certificates of title are created for each strata unit. The strata units represent the portion of the strata plan which may be owned in fee simple. Strata Corporation of Condominium Corporation: At the time the strata plan is filed, there is an automatic creation of a Strata Corporation. Each owner of the strata units constitute the members of the Strata Cor poration and their voting rights are prescribed in the strata plan. The Strata Corporation is charged with the responsibility of operating and administering the common areas and by-laws and this is done through an elected strata council comprising members of the Strata Corporation. 4. Footnotes - Chapter 1 1. S.W. Hamilton, I. Davis, and J. Lowden, "Condominium Development in Metropolitan Vancouver", The Real Estate Council of Greater Vancouver, December 1971, p. 2. 2- Strata Titles Act, S.B.C. 1966 ch. 46, Nov. S.B.C. 1974 ch. 89. 5. Chapter 2 Statistical Profile of Condominiums in British Columbia 2.1 History of Condominiums The condominium concept was first used by the ancient Hebrews, 2,500 years ago and was subsequently used by the Greeks, Phoenicians, Moslems and Egyptians. In 1804 the first modern codification of condominium law was enacted in the Code Napoleon of France (Article 664) and by 1884 there was reported to be 4,190 condominium structures in France. Condominium development also appeared in a major fashion after World War I in Europe. In North America, condominiums first became popular in Puerto Rico and Hawaii. Presently, virtually all the countries of Europe, all the American states, all the Australian states, and all the Canadian, provinces have comprehensive condominium, legislation.''" The British Columbia Strata Titles Act was introduced in 1966 and was modelled after the Strata Titles Act of New South Wales, Australia. The Alberta and Saskatchewan Acts were also patterned after the New South Wales Act while the remaining Canadian provinces adopted an American styled act. The main difference between the two styles of legislation is that the American-based law does not require a building or physical structure before the registration of a strata plan, the Australian law does. This is modified now in the B.C. Act which permits bareland and support structure strata lots. . Examining the history of condominiums reveals that the use of the condominium concept is stimulated in periods of housing shortages (such as in Europe after world War I) or in places of restricted building areas (within the walled confines of the ancient cities or the limited land areas of Puerto Rico and Hawaii). The development of condominiums in British Columbia also accelerated during a period of high demand for housing evidenced by rapidly increasing prices of single-family homes. The level of housing demand is only one reason for the acceptance of condominiums however, changes in lifestyle, consumer prefer ences, and economic capability also have an effect. The objective of this chapter is to quantify the develop ment of condominiums in British Columbia. The examination of the owners o£ condominiums and their motivations for purchase is left to Chapter Four - The Owners Survey. 2.2 Sources of Data and Methodology There are several sources of data used in this chapter. Initially data were collected from the seven Land Registry Offices in British Columbia. The data included the strata plan number, number of units in the project, data of registration, municipality or area the project was located in, the use of the units (residential or non-residential), data on phased projects and those constructed on leased land. The structure type of the project could also be determined by examining the strata plans registered in the Land Registry Offices (L.R.O.). As part of this set of data, the name of the developer was also collected to be used in Chapter Five. Data on conversions, the changing of an existing building with a single title to a strata title project with multiple titles within the same area, was not available from the records of the L.R.O.'s. This information was collected from the municipal governments in Metropolitan Victoria and Vancouver. The figures presented in this category should be used with caution for two reasons: first, before legislative changes were made in 1973 requiring the approval of the municipality before conversion could take place no records were kept on the number or location of any conversions. Secondly, even after 1973 some of the municipalities did not have complete records of the con versions. The number of conversions presented should therefore be considered a minimum number rather than a complete list. The structure type, was classified, into a variety of cate gories : townhouses or rowhouses (those units that are attached to one another horizontally but not vertically), low rise apart ments (those units that are attached vertically and may be but not necessarily horizontally and of less than four stories) high rise apartment (vertical attachment of four or more stories), duplex projects (two units attached vertically or horizontally), duplexes (more than one duplex in a strata plan), single detached, support structures, bareland, warehouse, commercial and mixed uses The next step in the primary data collection was to select a random sample of projects of more than 10 units in the metropoli tan areas of Victoria and Vancouver. From these projects, every eighth unit was then selected and the title searched to obtain sales price information. These data were then supplemented by other sources to provide some indication of the changes in prices for condominium units. 3 Condominium Developments The British Columbia Strata Titles Act became effective on September 1, 1966 but the first strata plan was not registered until February 29, 1968. The reason for the slow rate of develop ment initially was partially due to caution on the part of devel opers to enter into an entirely new area and partially due to the problems of financing. Financing was difficult to obtain because mortgagees ranked condominiums very low in order of their prefer-2 ence and 1967 and 1968 were periods of shortages of mortgage 3 money. This resulted in mortgagaes placing all available funds in more, traditional forms, of. housing. Table 1 displays the aggregate of all condominium develop ments in British Columbia since 1968 - there were no strata title projects developed prior to this time. From the rather modest beginning in 1968 the rate of condominium development increased rapidly to the point where, as of November 30, 1977, there are 46,411 strata units in 2340 strata plans in British Columbia. Of these, 30,502 (65.7%) of the strata units and 1262 (53.9%) of the strata plans are located in Metropolitan Vancouver. Metropolitan Victoria comprises the second largest group of strata units and plans with 5528 (11.9%) units in 432 (18.4%) plans. Combined these areas represent 77.6% of all units and 72.3% of all projects in the province. The next largest urban area in terms of condominium development is • TABLE 1 CONDOMINIUM PROJECTS BY YEAR AND LOCATION: PROVINCE OP-BRITISH COLUMBIA Land Registry Areas 1968 1969 1970 1971 1972 1973 1S74 1975 1976 1977 Total Pro-. .Unit ject Pro-. ..Unit ject Pro-. .Unit. ject Pro-. ..Unit ject Pro-. .Unit ]ect Pro-. .Unit ject Pro-jectUnit Pro ject Unit Pro jec bUnit Pro-jectUnit Pro ject Unit Pro ject Unit 1. Metropolitan Vancouv LRO 2. Balance Vancouver LR Total Vancouver LRO er 0 0 2 2 0 46 46 3 1 4 78 12 90 5 3 8 220 ' 16 236 18 1 19 494 10 504 37 5 42 1243 71 1314 50 1 51 1654 12 1666 72 10 82 2424 274 2698 75 . 12 87 2363 195' 2558 94 16 no 2686 205 2891 . 77 17 94 2044 260 2304 431 • 68 499 13206 1101 14307 18.4 2.9 21.3 28.4. 2.3 30. 8 4. Metropolitan New West minster LRO 5. Balance New Westmin ster LRO : 6. Total New Westminster LRO 3 0 3 102 0 102 10 4 .14 520 68 588 16 3 •19 674 98 772 31 3 34 1409 70 1479 35 0 35 1010 0 1010 82 5 87 2028 171 2199 83 9 92 2028 130 2158 L56 30 L86 2857 468 3295 213 65 278 4126 904 5030 202 29 231 2542 473 3015 831 148 979 17296 2352 19648 35.5 6.3 41.8 37.2. 4.9 42.3. j 7. Total Metropolitan Van-! couver Area (1+4) 3 102 13 598 21 894 49 1903 72 ' 2253 132 3682 L55 4452 231 5220 307 6812 279 4586 1262 305C2 53.9 65 7 • ! 8. Metropolitan Victoria 1 LRO I 9, Balance Victoria LRO ;10. Total Victoria LRO 0 z ? • 0 164 2 1 3 42 . 22 64 13 . 0 13 239 0 239 21 4 25 494 72 566 25 7 32 ' 640 141 781 34 6 40 553 160 713 42 10 52 602 210 812 52 23 75 900 567 1467 L09 80 1073 821 1894 134 48 -182 985 460 1441 432 181 £31-1694 5528 2617 8145 35030 18 .4 7.7. 75 ,1 72.3 n.s'; .' 5.6 17. f, 77.6. jll. All Metropolitan Areas : (1+4+8) 3 102 15 640 34 1133 70 2397 97 2893 166 4235 L97 5054 28 3 6120 416 7885 413 5571 '12. Kamloops City 13. Kclov/na 14. Vernon 15. Penticton 16. Balance Kamloops LRO 17. Total Kamloops LRO 0 • 0 0 3 0 2 5 0 0 6 0 27 33 4 4 1 0 1 10 249 9 21 0 19 298 3 1 2 0 4 10 115 2 4 0 • 74 195 1 1 0 0 1 3 - 2 14 0 0 64 80 4 1 0 0 2 7 172 72 0 0 51 295 4 13 3 G 6 32 164 89 60 130 84 527 8 29 3 4 30 74 312 124 56 185 288 965 5 24 6 2 • 27 •64 97 177 <35 48 494 851 2S 73 18 •12 73 205 mi 487 182 363 1101 . 3244. 12 3.1 0.8 0.5 3.1 87 2.3; 1.0 0.4 0.8' 2.1 6.9' 18. Nelson LRO 19. Prince Georgo LRO 20. Prince Rupert LRO 0 0 1 0 0 10 0 0 1 0 0 27 I 0 o 87 0 0 0 0 0 0 0 0 2 2 0 22 50 0 6 6 2 62 176 .,..93 6 € 4 117 88 4 2 A, 51 107 ,i on 19 16 339 431 297 0.9 0.8 0*1 ' 0.8' ' 1,0'r „D._Z-21, Grdnd Total) B.C, 7 315 21 742 46 1290 89 2874 120 3387 181 4658 237 6045 394 .817£ .667 11052 578 . 7873 234C 46411 100,1 'iml 10. Kamloops City with 29 projects (1.2%) and 1111 units (2.3%). The data in Table 1 requires some further explanation. The totals include amalgamations or consolidations of existing condominiums, cancelled plans which were registered and subse quently cancelled, demolitions, and each phase in a multi-phase project. For example, a strata plan with three phases is counted as three separate projects to reflect the timing differences of construction. These adjustments are minor in aggregate but should be kept in mind. Table 2 indicates the extent of these adjustments. After allowing for adjustments, one finds a total of 2302 strata plans in existence involving 45,597 units. Not all of these represent new units as 1188 existing units in 48 projects were converted to condominiums from another use. These are examined in more detail in Chapter Six. TABLE 2 Summary of Condominium Projects Projects Units 1. Provincial Totals 2340 46,411 2. Less Cancelled or Destroyed Plans* 14 245 ' Subtotal 232 46JL66 3. Less Consolidations 4 569 Subtotal 2322 45,597 4. Less Duplicate Count Phased Plans** 20 0 Existing Totals 2302 Plans 45,597 Units ••Projects include each phase in a phased strata plan. The total project included 14 phased strata plans with a total of 34 projects or phases. Each phase was recorded as a separate project in order to allocate the units to the correct year in which they were constructed. *In most cases the records at the Land Registry Office did not indicate the reason for cancellation of the plan. Therefore it is not possible to determine if the building was destroyed or converted to a non-condominium use. Examining the data chronologically one can see the number of condominium registrations in terms of both units and projects has risen steadily from 1968 to 1976 in the province. While the infor mation pertaining to 1977 is complete only to November 30, there is little doubt that the production of condominiums will be down approximately 20% from the 1976 level. This is a reflection of current poor market conditions being experienced. (This is dis cussed in more detail in section 2.6, Current Situation). While the early periods showed the greatest rate of increase of develop ment, the greatest increase in absolute terms in British Columbia took place between 1975 and 1976 where 273 projects and 2874 units more than the previous year's production was recorded. 1976 also represented the largest single year in terms of production accoun ting for 28.5% of all projects and 23.8% of all units (Table 3). Similar increases occurred in Metropolitan Vancouver during the 1975-76 period (an increase of 76 projects and 1592 units), however Metropolitan Victoria displayed its largest increase over the previous year in terms of units from 1974 to 1975 (298) although the largest increase in projects (57) took place between 1975 and 1976. 2.3.1 Condominium Developments - Type of Projects The distribution of condominium projects and units by type of project and by year is shown in Table 3. The majority of the classifications are self-explanatory, however some clarification may be required. Lines 1 to 11 are strictly residential projects. Support structures (line 12) and bareland subdivisions (line 14) 13. •. TABLE 3 PROVINCIAL CONDOMINIUM PROJECTS BY TYPE BY YEAR Type of Project 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977* Total '% Project Units Project Units Project Units Project Units Project Units Project Units Project Units Project Units 1 Project Units Project Units Project Units Project • Units SINGLE TYPE: Residential . 1. Single Detached 2. Duplex (2 Units) . 3. Duplexes 4. Townhouses 5. Low-Rise 6. High-Rise 3 147 • 4 165 15 656 4. 86 15 30 2 96 18 824 8 274 3 66 1 7 18 36 3 24 30 1606 18 610 13 377 2 • 24 25 50 1 4 43 1611 40 1409 6 239 4 44 53 106 1 35 35 1100 61 2225 20 862 1 11 67 134 1 6 42 1309 97 3343 21 1042 5' 132 .47 294 1 32 77 2085 104 2930 46 2313 6 '.74 353 706 6 134 102 2362 110 3373' 45 2430 18 161 311 622 -5 '54 92 1721 61 2321 27 1763 37 453 )89 1978 20 385 .58 13421 507 16735 181 9092 1.5 0.9 42.3 4.2 0.7 /l.O 19.7 29.3 21.7 36.0 7.7 19.5 MIXED TYPE: Residential 7. Duplex/Townhouse 8. Low-Rise/Townhouse 9. Townhouse/High-Rise 10. Single/Duplex 11. Duplex/Lowrise 1 58 1 63 1 72 1 14 0 0 1 264 1 52 1 103 0 0 0 . 0 0 3 626 1 122 1 19 1 7 0 0 0 0 0 0 2 18 0 0 2 no 6 953 3 297 4 51 1 7 /l.O £1.0 71.0 2.0 71.0 £1.0 /l.O /l.O /l.O £1.0 MIAKU TYPE: Non-Residential J 12. *. Support Structure 13. Lot Subdivision 14. Bareland Subdivision 15. Residential & Commercial 16. Warehouse 17. Commercial 18. Church/Hlghrlse 19. Cancelled 20. Consolidated 21. Lease • 2 0 • i .* 2 7 1 H 1 1 0 0 0 0 0 • 0 0 0 1 35 2 11 2 . 11 u • l : 12 Z 8 1 4 1 0 1 21 2 24 1 7 0 5 63 0 . 0 5 161 1 137 20 678 0 0 0 0 2 7 3 15 1 4 1 2 3 17 1 411 8 65 30 807 0 0 1 51 2 30 17 156 " 7 43 0 0 1 18 1 0 3 108 52 1509 2 8 1 51 5 49 31 260 11 62 1 2 14 245 4 569 11 173 2.2 3.5 /l.O /l.O 71.0 71.0 /l.O /l.O "1.3 71.0 /l.O £1.0 /l.O £1.0 71.0 71.0 71.0 1.23 £1.0 £1.0 22. Total: All Types .7 312 21 742 46 1290 89 2874 120 3387 181 4658 237 • 6045 $94 8178 66711052 578 7873 0 340 4641" loos; 100% 23. Percentage By Year 0.2 0.6 0.8 1.5 1.9 2.7 3.8 6.1 5.1 7.2 7,7 10.0 10.1 13.0 1 3.8 17.6 28.5 23.8 24.7 16.9 100 100 *To November 30i 1977t represent condominium projects with no buildings. Line 13, lot subdivision, refers to the creation of two or more strata lots out of a single strata unit. To avoid the double counting of units only the newly created strata units are indicated. Line 18 represents a novel use of the condominium concept to combine a church and a highrise residential building. Line 21 contains strata projects that are constructed on leased land - a more complete account of these is presented in Chapter Six. Classifying the development into residential and non residential one can see that the vast majority of the units and projects are residential in nature. Lines 1 to 11 and 21, which are all exclusively residential, aggregate to represent 95% of all units registered and 94% of all projects. This does not include the residential units contained in the mixed residential/ commercial projects or those support structures and bareland strata units used for residential purposes. The numbers involved in these categories are very small and will not affect the overall picture. While the registrations of non-residential projects is very small, the numbers have been increasing in recent years. As the market gains experience in these areas even more developments will likely be forthcoming in the future. Duplex (2 unit) condominium projects represent 42.3% of all projects but only 4.2% of all units. Lowrise apartment condo miniums represent the largest category in terms of the number of units (36.0% of units, 2l.9% of projects) followed by townhouses (29.3% of units, 19.7% of projects) and highrise apartments (19.5% and 7.7% for units and projects respectively). All other 15. uses are insignificant in relation to these categories. It is interesting to note however, that support structures are approxi mately double the number of any other non-residential use yet they have only been developed since 1975. Table 4 presents the distribution of condominiums by type and major locations. The locational distribution of structure types will depend on several factors including the relative price of land, level of demand for various structure types, municipal zoning, and on the availability of land in each area. Excluding the factor of municipal zoning it would be expected that the structures with the highest densities (high-rise apartments) would be closest to the inner city followed by the less dense low-rise apartments and finally by townhouses and lower density types in the suburban areas. This pattern is generally observable for condominium units. Line 1 of Table 4, Metropolitan Vancouver LRO represents the City of Vancouver, West Vancouver, North Vancouver City and North Vancouver District, all of which are relatively close to the central business district. Over one half (51.6%) of the condo minium projects in Metropolitan Vancouver are of low-rise design. These are followed in order of importance by high-rise apartments (18.2%) and townhouses (12.1%). Metropolitan New Westminster LRO, line 4, consists of the outlying municipalities of New Westminster, Burnaby, Port Coquitlam, Surrey, Port Moody, Delta, Richmond, Langley, and White Rock. As expected there is a lower percentage of apartment styled condo miniums in this area than in Metropolitan Vancouver, 20.7% versus 16. TABLE 4 CONDOMINIUMS BY TYPE AND MAJOR LOCATIONS 1»67-1977* Mixed i Single Town Low High , Resi Support Land Registry Areas Detached Duplex Duplexes House Rise Rise dential Structure Others 1 1. Metropolitan Vancouver LRO 1 5 43 86 6 105 52 1536 221 6697 78 4378 1 103 5 40 21 238 ; 2. Balance Vancouver LRO 4 33 16 32 2 36 30 498 4 189 0 0 0 0 9 312 1 1 , 3. Total Vancouver LRO 5 38 59 118 8 141 82 2034 225 6886 . 78 4378 1 103 14 352 22 239 4. Metropolitan New Westminster 12 199 495 990 0 0 119 5896 148 6318 23 2107 6 953 0 0 26 285 ' 5. Balance New Westminster LRO 1 8 66 132 4 106 41 902 32 1025 0 0 0 0 1 157 1 22 • 6. Total New Westminster LRO 13 207 561 1122 4 106 160 6798 180 7343 23 2107 6 953 1 157 27 307 i ' 7. Total Metrololitan Vancouver ' Area (1 + 4) 13 204 538 1076 6 105 171 7432 369/13015 101 6485 7 1056 5 40 47 523 i 8. Metropolitan Victoria LRO 1 2 212 424 2 24 73 1129 51 1210 74 2430 3 201 2 8 11 49 \ 9. Balance Victoria LRO 10 152 76 152 4 50 49 1150 20 479 4 130 4 51 11 271 0 0 10. Total Victoria LRO 11 154 289 578 6 74 122 2279 71 1689 78 2560 7 252 12 279 11 49 11. All Metropolitan Areas (1 + 4 + 8) 14 209 750 1500 8 129 244 8561 420 14225 175 8915 10 1257 7 48 58 572 12. Kamloops City 1 . 40 1 2 1 60 21 810 4 141 0 0 1 58 0 0 0 0 13. Kelowna 0 0 54 108 0 0 8 99 6 228 1 36 0 0 2 6 2 10 14. Vernon 0 0 5 10 1 4 7 125 4 28 0 0 0 0 1 15 0 0 15. Penticton 0 0 1 2 0 0 5 244 4 102 1 11 0 0 1 4 0 0 16. Balance Kamloops LRO 7 14 20 40 0 0 19 367 8 148 0 0 0 0 18 517 0 0 17. Total Kamloops LRO 8 54 81 162 2 64 60 1645 26 647 2 47 1 58 22 542 2 10 18. Nelson LRO 0 0 0 0 14 267 3 72 0 0 0 0 0 0 0 0 19. Prince George LRO 0 0 0 0 12 201 2 99 0 0 1 52 1 79 0 0 20. Prince Rupert LRO 0 0 0 0 8 197 0 0 0 0 0 0 1 100 0 0 21. GRAND TOTAL B.C. 37 453 989 1978 20 385 458 13421 507 16736 181 9092 16 1418 52 1509 62 605 ^Excludes consolidations and cancellations 17. 69.8%. Also this area has a larger percentage (14.4% versus 12.1%) and in absolute terms, twice as many townhouse units as Metropolitan Vancouver. The most interesting feature of the Metropolitan New Westminster area is the large number of duplex projects, 495. These represent 59.7% of all projects in the area and 50% of all duplex projects in the province. Examining the Metropolitan Victoria area, line 8, a note of caution must be added. A large though undetermined number of the condominium projects in this area that are classified as high-rise contain only 3h or 4 stories. Hence by definition they are classified as high-rise but locally they are considered low rise. This fact makes it difficult to comment on the Metro politan Victoria area relative to other areas. Excluding the major metropolitan areas, townhouses are the most popular condominium design. This also follows the pattern suggested above. Land costs are generally lower in the outlying areas which allows lower density developments to be constructed profitably. Finally it should be noted that support structures are most often located in the non-urban areas. Only 13% of the support structure projects involving 3% of the units are located in Metropolitan Vancouver, New Westminster, or Victoria. 2.3.2 Condominium Development - Size of Projects The distribution of all condominium projects by year and size is shown in Table 5. It should be noted that in this table, each phase in a multi-phased condominium development is counted as a single project. Hence the range in project size is from a one unit project (of which there are two, one, a commercial phase LEAF 18 OMITTED IN PAGE NUMBERING. 18a. TABLE 5 CCMOMINIUM PROJECTS BY ' PROJECT SIZE BY YEAR: PROVINCIAL TOTALS Size of Project 19 6 8 1 9 6 9 1 9 7 0 1 9 7 1 1 9 7 2 1 9 7 3 1 9 7 4 19 7 5 1 9 7 6 1 9 7 7 T 0 T AL PERCENTAGE Provincial Totals Pro ject Unit Pro ject Unit Pro ject Unit Pro ject Unit Pro ject Ui.it Pro ject Unit Pro ject Unit Pro ject Unit Pro ject Unit Pro ject Unit S ^t ject Pro ject Unit 1- 2 Units 0 0 0 0 15 30 18 36 26 51 54 108 67 134 148 296 358 716 331 661 1017 2032 43.6% 4.4% 3- 9 0 0 0 0 2 12 12 76 11 62 18 101 18 105 33 189 75 395 83 453 252 1393 10.8 3.0 10- 19 1 12 6 86 8 103 17 243 20 288 25 321 42 616 62 941 57 787 45 666 283 4063 12.1 8.7 20- 39 3 94 8 182 9 253 22 667 39 1152 47 1353 56 1620 90 2505 96 2664 60 1660 430 12150 18.4 26.2 40- 59 1 42 1 51 6 304 5 259 6 288 16 715 27 1260 29 1422 39 1821 36 1735 166 7897 7.1 17.0 60- 99 1 63 2 164 4 326 7 540 13 1025 12 805 18 1319 15 1044 23 1646 '12 812 107 7744 4.6 16.7 100-499 1 101 2 259 2 262 8 1053 4 521 9 1255 8 991 14 1781 18 3023 9 1379 75 10625 3.2 22.9 500 plus 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 , 1 507 1 507 <1.0 1.1 Non-Me tropolitan Areas 1- 2 0 0 0 0 5 10 4 8 5 10 2 4 6 - 12 26 52 133 266 73 145 254 507 39.7 4.7 3- 9 0 0 0 0 1 4 1 3 1 4 1 . 8 5 38 15 89 36 195 27 150 87 491 13.6 4.7 : 10- 19 1 12 3 • 40 4 47 '4 53 4 57 2 26 9; 111 26 363" 24 ,341 • 20 292 97 1342 15.1 12.9 20- 39 1 34 3 62 0. 0 8 236 10 282 6 184 10 245 27 695 38 1044 29 806 132 3588 20.6 34.5 40- 59 ' , o 0 0 0 2 96 1 58 . 1 54 3 137 5 253 9 439 8 394 9 403 38 1834 5.9 17.7 60- 99 1 . "63 0 0 0 0 0 0 1 87 1 64 3 192 4 283 9 638 4 305 23 1632 3.6 15.7 100-499 1 101 0 0 0 0 1 119 0 0 0 0 1 140 1 137 2 289 2 201 8 987 1.2 9.5 £ ;500 plus 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 .0 0 0 0 0 0 0 . 0 ? 18b . (a) Subdivision of existing strata lot, only new lot counted. (b) One commercial unit in a two-phase project. TABLE 5 (continued) , CONDOMINIUM PROJECTS BY PROJECT SIZE BY YEAR; , Size of I Project 1 9 6 8 1 9 6 9 3 Oi. 19 7 0 1 9 7 1 1 9 7 2 19 7 3 1 9 7 4 1 9 7 5 1 9 7 6 To Nov.30 1 9 7 7 TOTAL PERCENTAGE . i • Pro ject Unit Pro ject Unit Pro ject Unit Pro ject Unit Pro ject Unit Pro ject Unit Pro ject Unit Pro ject Unit Pro ject Unit Pro ject Unit Pro ject Unit i | Metropolitan i Vancouver i 1- 2 Units 0 0 0 0 4 8 12 24 18 36 38 76 37 74 103 206 162 324 170 340 544 1088 43.1% 3.6% ' 3- 9 0 0 0 0 0 .0 8 58 5 27 12 70 11 56 10 52 22 100 33 170 101 533 8.0 1.7 \ 10- 19 0 0 2 28 3 43 5 66 12 179 20 246 26 405 31 .499 23 314 13 195 135 1975 10.7 6.5 20- 39 2 60 4 96 5 126 10 309 18 534 33 943 41 1221 47 1389 44 1247 25 693 229 6618 18.2 21.7 40- 59 1 42 1 51 4 208 1 44 5 234 '11 485 21 965 18 376 28 1273 25 1227 115 5405 9.1 • 17.7 60- 99 0 0 2 164 3 247 6 468 11 842 9 607 12 880 10 595 13 942 6 382 72 5227 5.7 17.1 100-499 0 0 2 259 2 262 7 934 3 401 9 1255 7 851 12 1503 15 2612 6 1072 63 9149 5.0 29,9 500 plus 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 507 1 507 <1.0 1.6 Metropolitan Victoria . . • 1- 2 • 0 0 0 0 6 12 2 4 3 5- 14 .28 24 48 19 38 63 126 88 176 219 437 50.7 7.9 3-9 0 0 0 0 1 8 3 15 5 31 5 23 2 11 8 48 17 100 23 133 64 369 14.8 6.7 • 10- 19 0 0 1 18 1 13 8 124 4 52 3 . 49 7 100 5 79 10 132 12 179 51 746 11.8 13.5 20- 39 0 0 1 24 4 127 4 122 11 336 8 226 5 154 16 421 14 373 6 161 69 1944 15.9 35.2 40- 59 0 0 0 0 0 0 3 157 0 .0 2 93 1 42 2 107 3 154 2 105 13 658 3.0 11.9 H CO cr .60- 99 0 0 0 0 1 79 1 72 1 96 2 134 3 247 1 66 1 66 2 125 12 885 2.8 16.0 100-499 0 0 0 0 0 0' 0 0 1 120 0' 0 0 0 1 141 1 122 1 106 4 489 <1.0 8.8 500 plus 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 SOURCE; Land Registry Data excluding cana »d or amalgamated projects with no units reports Includes cancelled or amalgamated projects where units were recorded in the Land Registry Office. Each phase in a strata plan is counted as a separate project. in a mixed residential/commercial development and the other being the newly created strata lot resulting from a lot subdivision) to a project of 507 units developed as a single phase. The projects developed in the 1-2 unit size category (essen tially duplexes) account for 43.6% of the projects but only 4.4% of the units in the province. Conversely, the 100-499 unit category accounts for only 3.2% of the projects but 22.9% of the units provincially. The largest group in terms of units is the 20-39 group representing 26.2% of units and 18.4% of projects. The non-metropolitan areas follow a similar pattern with a large percentage of duplex projects (but few units) and the largest category being the 20-39 unit group. Comparing the metropolitan Vancouver and Victoria areas one can see that there are more larger projects in Metropolitan Van couver. Twenty-one percent of the projects involving 66% of the units in Metropolitan Vancouver are in projects of 40 units or more. The same category in Victoria represents 7% of the projects and 37% of the units. It is also of interest to note that of the 76 projects containing 100 or more units in the province, 64 (84%) are in Metropolitan Vancouver. There are only four such projects in Metropolitan Victoria. Table 6 is provided to allow some quick comparisons to be made between the areas; it is compiled from Table 5. i ..s . - i 20. TABLE 6 - SUMMARY Percent of Condominium Projects by Size Size of Project Provincial Total Project Unit Non-Metropolitan Areas Project Unit Metropolitan Vancouver Project Unit Metropolitan Victoria Project Unit 1-2 43.6% 4.4% 39.7% 4.9% 43.1% 3.6% 50.7% 7.9% 3-9 10.8 3.0 13.6 4.7 8.0 1.7 14.8 6.7 10-19 12.1 8.7 15.1 12.9 10.7 6.5 11.8 13.5 20-39 18.4 26.2 20.6 34.5 18.2 21.7 15.9 35.2 40-59 17.0 5.9 17.7 9.1 17.7 3.0 11.9 60-99 4.6 16.7 3.6 15.7 5.7 17.1 2.8 16.0 100-499 3.2 22.9 1.2 9.5 5.0 29.9 <1.0 8.8 500 plus <1.0 1.1 0 0 <1.0 1.6 0 0 Source: Table 5 Referring again to Table 5 and the provincial totals, it is possible to identify some modest trend in the size of projects over time. The project sizes appear to increase up until 1974 with projects of 40 or more units representing an increasing proportion of the total sample. In 1975 there was a shift back to smaller scale projects (under 40 units) which again reversed in 1976 and again in 1977. During 1977, projects of 40 or more units accounted for 49.8 percent of the total units as compared with the 10 year average of 57.7 percent. This suggests a current trend towards smaller scale projects reflective no doubt of the slack market for condominium projects. Condominium projects by type, size and major location are displayed in Table 7. Considering the provincial totals the largest average sized project type is the mixed residential (58.92 units per project) due largely to the seven projects in the 100-499 unit category. The next largest average sized group is high-rise (50.23 units per project) followed by low-rises (33.01 units per project) and townhouses (29.37 units per project). The non residential projects, warehouse, commercial, and other, all tended to be small averaging 8.39, 5.64, and 8.50 units per project respectively and none of the projects exceeded 39 units in size. The land and support structure projects were fairly evenly divided amongst the size categories. Making regional comparisions one can see the developments in the non-metropolitan areas are smaller than those in the province and in Metropolitan Vancouver across all types of projects except land and support structures. This is generally true for compari sons with Metropolitan Victoria also, but the duplexes and 22 . TABLE 7 .Size of Project Single Family Duplex Duplexes Town House Low Rise High Rise Mixed Residen tial Land and Support 1 o o -Warehouse i 3 / /: Corrmer-• cial Other • Provincial Totals Pro ject Unit Pro ject Unit Pro ject Unit Pro- .. ject Unit Pro-ject ^ Pro ject Unit Pro ject Unit Pro ject Unit Pro ject Unit i j 1- 2 Units 13 26 989 1978 0 0 0 0 0 0 1 2 1 2 11 4 8 1 1 1 2 ! 3- 9 7 43 0 0 12 64 126 716 51 294 3 24 10 47 15 75 16 80 • 9 39 3 11 ' 10- 19 1 9 ' 108 0 0 0 0 97 1297 127 1900 30 462 2 33 5 96 8 108 0 0 1 12 , 20- 39 4 86 0 0 4 123 123 3384 201 5789 73 2120 0 0 17 456 3 64 1 22 1 26 ; 40- 59 4 190 0 0 3 138 42 2003 75 3530 34 1632 5 259 3 145 0 0 0 0 0 0 60- 99 0 0 0 0 1 60 51 3745 32 2277 T17 1232 2 , 135 4 295 0 0 0 0 0 0 100-499 0 0 0 0 0 0 18 2276 21 2946 22 3113 7 1115 4 490 0 0 0 0 0 0 500 plus 0 0 0 0 0 0 0 0 0 0 1 507 0 0 0 0 0 0 0 0 0 0 Average Size 12.24 2.0 19.25 29.37 33.01 50.23 58.92 28.51 8.39 5. 64 8.50 Non-Metropolitan Areas 1- 2 11 22 239 478 0 0 0 0 0 0 0 0 0 0 3 6 0 0 1 1 0 0 3- 9 3 19 0 0 7 32 47 272 16 95 0 0 2 18 10 45 2 10 0 0 0 0 10- 19 3 40 0 0 0 0 65 852 19 295 1 11 2 33 6 96 0 0 0 0 0 0 20- 39 4 86 0 0 2 68 70'1893 33 915 4 124 0 0 16 435 0 0 1 22 0 0 40- 59 2 80 0 0 2 96 20 986 9 426 1 42 2 11C 2 94 0 0 0 0 0 0 60- 99 0 o 0 0 1 60 9 637 9 640 0 0 0 0 4 295 0 . 0 0 0 0 0 100-499 0 0 0 0 0 0 2 220 1 140 0 0 0 0 4 490 0 0 0 0 0 0 to to 500 plus 0 0 0 0 0 0 0 0 0 0 0 0 0 C 0 0 0 0 0 0 0 0 Average 10.74 2.0 21.33 22.82 28.86 29.50 26.83 32.47 5. 0 11.50 0.0 townhouses must also be added to the list of exceptions. The average project sizes in Metropolitan Vancouver also tend to be greater than in Metropolitan Victoria. Interestingly, the average size of townhouses in Metropolitan Vancouver is greater than the average size low-rise while in Metropolitan Victoria the reverse is true. High-rises have a greater average size than either low-rises or townhouses in each area. Referring again to Table 4 there is exhibited a significant variation in the average sized project within Metropolitan Van couver. In the Metropolitan Vancouver LRO area the average project size for townhouses, low-rises, and high-rises was 29.5, 30.3, and 56.1 units per project respectively. In the Metropoli tan New Westminster LRO area the averages increased to 49.5, 42.7, and 98.6 units per project for each group respectively. In order to determine any trends in the size of projects, the average size of project for each year was calculated. Table 8 provides a summary for the three main types of residential projects. The other types of projects are not reported since they reveal no apparent trend. Looking first at the townhouse type of project, the only noticeable trend is for Metropolitan Vancouver where the trend is towards smaller projects. The same trend is not evident either in the non-metropolitan areas or in Metropolitan Victoria; however, in each of these areas the aver age size townhouse project is considerably smaller than in Metropolitan Vancouver. In the category of low-rise projects Metropolitan Victoria shows a trend towards smaller projects Table 3 Average Project Size by Year and Location (Major Residential Categories)' " YEAR METROPOLITAN VANCOUVER METROPOLITAN VICTORIA REST OF PROVINCE 1968 T 0 L 34 H 0 T 0 L 0 H 0 T 49 L 63 H 0 1969 67 21 0 21 0 0 16 22 0 1970 64 28 19 8 38 28 10 0 0 1971 75 38 32 15 36 . 28 36 ,14 0 1972 53 38 24 26 20 48 31 0 0 1973 36 37 56 14 35 33 29 35 41 1974 39 33 77 38 37 25 25 51 20 1975 43 30 59 21 14 36 23 25 11 1976 35 34 66 12 21 26 21 27 33 1977 25 50 85 9 14 41 19 '24 0 All Years 43 35 64 15 24 33 23 29 29 Source: Land Registry Data. All averages are rounded to nearest whole unit. T = townhouse; L = lowrise; H = highrise; 25. while Metropolitan Vancouver and the rest of the province are fairly uniform over the 10 years period. The final noticeable trend is in the category of high-rise projects in Metropolitan Vancouver where the trend has definitely been towards larger scale projects. 2.4 Condominium Development as a Proportion of the Housing Market In section 2.3.1 the size and scope of the condominium market was discussed, however, the significance of condominium development is most clearly evident when it is related to other sectors of the housing market. Previous work examined this relationship on the basis of the type of tenure... "It is the distribution between rental units and home ownership units rather than the total number of units started which is of primary inter-4 est." This method of comparison is valid and in fact necessary, however, the relationship based on structure type should not be ignored. The marked difference between the lifestyles congruent with townhouse and apartment living and those of single family dwelling indicates the existence of a different market which should be examined. Tables 9, 10, and 11 give the number and percentage of housing starts by tenure and structure types for British Columbia, Metropolitan Vancouver and Victoria respectively. The "start" date of the condominiums is actually the date of registration which, due to the requirement that the building be constructed before registration, is not strictly comparable with other start ing dates. The time required to register is not usually excessive and therefore these figures will provide a reasonable estimate of the production each year. It should also be noted that the number of rental units will be understated each year by the number of condominiums that are rented. No accurate information is available on the extent that this occurs and therefore no adjustment has been made. Rental starts are defined as the number of rowhousing and apartment starts (column 2) minus the number of condominium registrations (which exclude all condominium duplexes and single detached units (column 4)) in each year. Ownership starts are the number of single family detached, semi-detached, and duplex units (column 1) plus the number of condominium registration (column 4). Multiple family dwelling units are the number of rowhousing and apartment starts listed in column 2. The propor tion of multiple family units relative to the total is calculated by adding the percentage of rental relative to the total (column 8) and the percentage of condominiums relative to the total (column 9). From 1968 to 1976 the percentage of multiple family units to the total ranged from approximately 40 to 6 0% in all areas. While the proportion of multiple dwelling units remained relatively constant over this period the proportion of rental units declined steadily in British Columbia and Metropolitan Vancouver. This was off-set by a similar though opposite increase in the percentage of condominiums. In 1976 rental units only accounted for 17.5% and 13.9% of total housing starts while condominiums increased to represent 26.2% and 37.9% of the TABLE 9 HOUSING STARTS - PROVINCE OF BRITISH COLUMBIA (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Year Single Family Detached, Semi-Detached, Duplex Row and Apart ment (Multi ple) Total Housing Starts Condo minium (Exclud ing Duplex and Single Detached Total Residen tial Con dominiums Planned Rental (2)-(4) Planned Owner (l)+'(4) Rental as % of Total (6)r(3) Condo minium as % of Total (5)*(3) Condo minium as % of multiple .(4)*(2) Condo minium as % of owned (5) + (7) 1967 14,027 10,073 24,100 0 0 10,073 14,027 41.8 0 0 0 1968 13,613 12,583 26,196 312 312 12,271 13,925 46.8 1.2 2.5. 2.2 1969 14,411 17,409 31,820 742 742 16,667 15,153 52.4 2.3 4.3 4.9 1970 14,860 12,456 27,316 1,260 1,290 11,166 16,120 40.9 4.7 10.1 8.0 1971 18,927 15,838 34,765 2,810 2,853 12,985 21,737 37.4 8.2 17.7 13.1 1972 19,708 15,609 35,317 3,277 3,351 12,258 22,985 34.7 ' 9.5 21.0 14.6 1973 22,214 15,413 37,627 4,486 4,636 10,927 26,700 29.0 12.3 29.1 17.4 1974 19,304 12,116 31,420 5,855 6,000 6,261 25,159 19.9 19.1 48.3 23.8 1975 20,181 13,971 34,152 7,360 7,786 6,611 27,541 19.3 22.8 52.6 28.3 1976 21,970 15,757 37,727 9,138 9,918 6,619 31,108 17.5 26.2 57.9 32.0 'otals 179,215 141,225 320,440 35,240 36,888 105,838 214,455 33.0 11.5 24.9 17.2 TABLE 10 HOUSING STARTS - VANCOUVER METROPOLITAN AREA (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Residen Single tial Con Family Row and dominium Condo Condomin Condo Detached, Apart (Exclud Total Rental minium ium as % minium Semi- ment . Total ing Duplex Residen Planned Planned as % of as % of of as % of Detached, (Mul Housing and Single tial Con Rental Owned Total Total Multiple2 Owned Year Duplex tiple) Starts Detached) dominiums* (2)-(4) ' (D + (4) (6) + (3) (5)T(3) (4)-r(2) (5) + (7) 1967 6,328 7,568 13,896 0 0 7,568 6,328 54.4 0 0 0 1968 5,658 10,032 15,690 102 102 9,930 5,760 63.3 0.6 1.0 1.8 1969 5,165 12,525 17,690 598 598 11,927 5,763 67.4 3.4 4.8 10.4 1970 4,832 8,605 13,437 886 894 7,719 5,718 57.4 6.6 10.3 15.6 1971 5,674 9,879 15,553 1,872 1,903 8,007 7,546 51.4 12.2 18.9 25.2 1972 7,679 8,531 16,210 . 2,193 2,253* 6,338 9,872 39.0 13.8 25.7 22.8 1973 9,090 8,235 17,325 3,551 3,671* 4,684 12,641 27.0 21.2 43.1 29.0 1974 7,194 7,258 14,452 4,354 4,428 2,904 11,548 20.0 30.6 59.9 38.3 1975 7,051 6,264 13,315 4,704 5,020 1,560 11,755 11.7 37.7 75.0 42.7 1976 8,342 8,360 16,702 6,023 6,345 2,337 14,365 13.9 37.9 72.0 44.1 Total 67,013 87,275 154,270 24,283 25,214 62,974 91,296 40.8 16.3 27.8 27.6 *Includes all condominiums on leased land since they are all residential. i I I TABLE 11 i I HOUSING STARTS - VICTORIA METROPOLITAN AREA (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Residen Single tial Con Family Row and dominium Condo Condomin Condo Detached, Apart (Exclud Total Rental minium ium as % minium Semi- ment Total ing Duplex Residen Planned Planned as % of as % of of as % of Detached, (Mul Housing and Single tial Con Rental Owned Total Total 2 Multiple Owned Year Duplex tiple) Starts Detached) dominiums (2)4(4) (l) + (4) (6)^(3) (5)4(3) (4)4(2) (5)4(7) 1967 889 575 1,464 0 0 575 889 39.3 0 . 0 0 1968 1,150 1,366 2,516 0 0 1,366 1,150 54.3 0 0 0 1969 1,287 2,457 3,744 42 42 2,415 1,329 64.5 1.1 1.7 3.1 1970 811 1,748 2,559 227 239 1,521 1,050 59.4 9.3 13.0 23.0 1971 1,034 2,068 3,102 472 476 1,596 1,506 51.4 15.3 - 22.8 31.6 1972 1,293 2,899 4,192 600 604 2,299 1,893 54.8 14.4 20.7 31.9 1973 1,473 2,540 4,013 516 542 2,024 1,989 50.4 13.5 20.3 27.2 1974 1,324 1,306 2,630 554 602 752 1,878 28.6 22.9 42.4 32.0 1975 1,573 2,407 3,980 855 893 1,552 2,428 38.9 22.4 35.5 36.7 1976 1,338 3,101 4,439 947 1,069 2,154 2,285 48.5 24.1 30.5 46.8 Totals 12,172 20,467 32,639 4,213 4,467 16,254 16,397 49.8 13.7 20.6 27.2 Sources:- Column (1) and (2) - Central Mortgage and Housing Corporation, Canadian Housing Statistics, 1976 and 1972, Ottawa. Column (4) - Table 2.2, Row 7 excluding duplex units; Column (5) - Table 2.2, Row 7 Notes;- Duplex units excluded to permit comparison of data. CMHC Data in Column 1 includes duplex units, independent of whether or not they are strata plans. Condominium duplex units excluded to permit comparison of building types. total in the province and Metropolitan Vancouver respectively. Condominiums also represented 57.9% and 72.0% of multiple starts in 1976 in the two areas. It can therefore be concluded that condominiums have been a significant factor in the housing market. The Metropolitan Victoria market did not follow exactly the same trend as in the province or Metropolitan Vancouver but the conclusion regarding the significance of this sector of the hous ing market is unchanged. Rental units as a percentage of total housing starts declined from 1969 to 1974 then increased to 1976. Condominiums as a percentage of the total remained stable at approximately 14% from 1971 to 197 3 then increased to approximately 23% from 1974 to 1975. Condominiums as a proportion of the multipl family market peaked in 1974 at 42.4% and has declined since then. Condominiums as a share of the ownership market have experienced fairly steady growth through the entire period. In 1976 condo miniums represented 24.1% of all housing starts, 30.5% of multiple starts and 46.8% of starts intended for owner-occupiers. Using Tables 9, 10, and 11 similar tabulations were construc ted for the non-metropolitan areas of the province; these are presented in Table 12. Condominiums are a much less significant factor in the housing market in the outlying areas than in the metropolitan localities. Condominiums as a percentage of total starts did not exceed 10% until 1975. Over the entire period of 1967 to 1976 condominiums only accounted for 5.4% of all new housing starts in this area in comparison to 27.6% in metropoli tan Vancouver and 27.2% in Metropolitan Victoria. 31. TABLE 12 Housing Starts; Non-Metropolitan Areas 1967-1976 Condominium As Year Total Starts Residential Condominiums % Total 1967 8740 0 0 1968 7990 210 2.6 1969 10386 102 0.9 1970 11320 157 1.3 1971 16110 474 2.9 1972 14915 494 3.3 1973 16289 423 2.6 1974 14338 970 6.7 1975 16857 1873 11.1 1976 16586 2504 15. 1 TOTAL 133,531 7207 5.4 32 . The success of the condominium concept in terms of the number of units created and the significant share of the housing market those units represent is undeniable. There have been numerous factors that have contributed to this success both in terms of demand and supply. While it is beyond the scope of this study to quantify the extent to which each factor is influencial it is worthwhile to discuss them in a qualitative manner. First, the factors affecting demand. The two major factors influencing the demand for housing in the 1960's and 1970's were the "baby boom" after World War II and the steady increases in real income (Tables 13 and 14 respectively). From 1965 to 1971, the 20-24 age group increased by approximately 55,400 persons while at the same time the 65+ age group increased by 26,400 persons in British Columbia. These groups greatly increased the apartment demand and resulted in the number of multiple unit starts increasing to one-half of all starts in the province from their previous level of 35% prior to 1962. The 20-24 year old group had moved into the potential home-ownership population by the 1971-1976 period. "Supported by steady increases in real incomes, both at the personal and household level and liberal credit conditions, the baby-boom moved into home ownership with a vengeance.This resulted in rapidly rising house prices (evidenced in the following section). By this time the condo minium concept was becoming generally accepted as a viable form of tenure and hence also experienced an increase in demand. Some of this demand was likely due to single detached prices increasing to the level that excluded many purchasers' financial capabilities. ex c < t «/-ec/ TABLE 13 CHANGE IN BRITISH COLUMBIA POPULATION BY AGE GROUP CHANGE IN NUMBER OF PERSONS IN EACH AGE GROUP (in Thousands) (Relative change in parentheses) TOTAL 0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-64 65 + 1951-56 2 33. 3 30.9 40.7 30. 0 16. 1 6.6 9.9 15. 4 12. 2 47. 7 24.7 (20.0) (24.6) (40.7) (38. 2) (22. 9) (8.3) (9.8) (17. 0) (13. 4) (15. 3) (19.6) 1956-61 230.4 30 31.1 42. 1 26. 2 8.8 1.5 6. 0 12. 8 57. 1 14. 8 (16.7) (19) (22.1) (38. 8) (30. 3) (10.2) (1.5) (5. 6) (12. 4) (15. 9) (9.8) 1961-66 222. 8 2.0 31.4 31. 7 45. 8 34.6 11.8 1. 7 5. 3 67. 4 13. 0 (13.7) (1.1) (18.3) (21) (40. 7) (36.3) (11.6) (1. 5) (4. 6) (16. 2) (7.9) 1966-71 332. 8 -13.4 9.1 39. 9 42. 7 55.4 46.2 19. 1 5. 7 79. 8 26.4 (18.0) (-7.1) (4.5) (21. 9) (27. 0) (42.7) (40.1) (16. 8) 4. 7 (16'. 5) (14.8) 1971-76 282 -2.1 -18. 2 5. 6 36. 8 36.3 58.8 43. 9 17. 5 66. 6 37.0 (12,9) (-1.2) (-8.6) (2. 5) (18. 3) (19.6) (36.7) (33, 0) (13. 8) (11. 8) (18.0) Apart Family Apart ment j ment SOURCE: DAVID BAXTER, THE BRITISH COLUMBIA AND VANCOUVER HOUSING MARKETS, OP, CIT. CO CO Year Total TABLE 14 BRITISH COLUMBIA POPULATION BY AGE GROUP* (THOUSANDS) Denotes the post war baby boom AGE GROUP 0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-59 40-64 65+ 1951 1165.3 100% 125. 9 10. 8 99.9 8.6 1956 1398.6 156. 8 140. 6 100% 11. 2 10. 0 78.6 6.8 108.6 7.8 70, 6, 86, 6, 3 0 4 2 79.8 6.8 86.4 6.2 91.6 7.9 100.6 7.2 90. 8 7.8 106.2 7.6 91.2 7.8 103.4 7.4 311.1 26.7 358. 8 25.7 126.1 10. 8 150. 8 10. 8 1961 1629.0 186. 8 171. 7 150 .7 112. 6 95. 2 102. 1 112.2 116. 2 415. 9 165. 6 100% 11. 5 10. 5 9 .2 6. 9 5. 8 6. 3 6.9 7. 1 25. 5 10. 2 1966 1873.7 188. 8 203. 1 182. 4 158. 4 129. 8 113. 9 113. 9 121. 5 483. 3 178. 6 100% 10. 1 10. 8 9. 7 8. 5 6. 9 6. 1 6. 1 6. 5 25. 8 9. 5 1971 2184.6 175. 4 212 .2 222. 3 201. 1 : 185. 2 160. 1 133. 0 127. 2 563. 1 205. 0 100% 8. 0 9 .7 10. 2 9. 2 8. 5 7. 3 6. 1 5. 8 25. 8 9. 4 1976 2466.6 173. 3 194. 0 227. 9 237. 9 221. 5 218.9 176. 9 144. 7 629. 7 242. 0 100% 7. 0 7. 9 9. 2 9. 6 9. 0 8.9 7. 2 5. 9 25. 5 9. 8 * Source: B.C. Vital Statistics (Victoria: Provincial Printer, 1976) David Baxter, The British Columbia And Vancouver Housing Markets, Op. Cit, 1976 figures from 1976 Census of Canada, supplied by Data Enquiries - Regional Office 35. pagination only 36 This sector turned to condominiums to establish themselves in the housing market and to satisfy their demand for home ownership. Again supplementing this was the over 65 age group that no longer needed a single detached house as their children had established their own households. Hence, they were trading down in size to condominiums.^ The demand for condominiums was further stimulated by two legislative changes. First the 1971 federal Income Tax Act was amended to incorporate a tax on capital gains except those result ing from the sale of a principal residence, hence home ownership was an attractive investment from this point of view. The second legislative change was the introduction of rent controls by the provincial government in 1972. The rental market was. experiencing rising rents and very low vacancies at this time and these controls acted as a deterent to new rental production. The low vacancy rate continued effectively channeling those desiring apartment accommoda tion into the expanding condominium market, either as owner-occupiers or as tenants renting from investors. The provincial government further contributed to the demand for home ownership by offering low interest rate second mortgages or cash grants to first time home buyers. The federal government also offered assistance to lower and moderate income families in-the form of the Assisted Home Ownership Program (AHOP). As this program was limited to dwellings of under $47,000 (1976) in price the majority of units financed under this program were condominiums. Ninety-five percent (657) of the AHOP units constructed in Metropolitan Vancouver and Victoria during 19 76 were condominiums. The supply of condominiums responded to the increased demand and the resulting rising prices. Further factors affecting production were: a) the removal of "tax shelters" on multiple unit rental buildings in the 1970 federal Income Tax Act, b) the imposition of rental controls provincially in 19 72 which when combined with (a) resulted in a shift away 7 from the production of rental dwellings, c) high mortgage rates were experienced from 1974 to 1976 peaking at 12.5% which restricted both the purchasing and constructing of new units, d) by mid-1975 the number of unsold and vacant condominiums 8 had peaked at an estimated:, 1700 units ->. the production had begun to outstrip the demand, e) in 1977 a reduction in the number of new condominiums produced was noted. This was the result of a continuing large unsold inventory (approximately 1600 units). The situation was further compounded by the initiating of the federal Assisted Rental Program (ARP) which shifted pro duction back to the rental sector. In 1976 there were 1,797 units constructed under this program and within the first five months of 1977, applications for 1,568 units had been processed. Further applications had been received for an additional 4,400 units as of August 1977. The development of condominiums as a portion of the housing market can now be described in general terms- Condominiums were introduced just as the demand for home ownership was beginning to increase. This demand was stimulated by several government programs while others reduced the profitability(of the rental sector of the housing market. Unfortunately the production of condominiums continued at a high level even as much of the large "leading edge" of the baby-boom had been accommodated. Further, the migration into British Columbia and particularly Metropolitan Vancouver has declined from its previous levels and the rate of increase of real incomes has also declined, both of which reduce the demand for housing. These factors have now resulted in the present oversupply of condominium units. The extent of this oversupply will be discussed in greater detail in Section 2.6. 2.5 Condominium Sale Prices Selling prices are of great importance to purchasers, mortgagees and developers. The purchasers and mortgagees are primarily interested in the protection and growth in value of their investment while developers need such information for the planning and marketing of their projects. Due to the numerous factors affecting the price including location, size of units, features included, date of sale, method of financing, level of taxes and common areas charges and the common features offered, a comprehensive analysis of selling prices is beyond the scope of this study. Instead some information will be presented that will provide insights into the trend of condominium prices. Two sources of data were used to reveal the level of condominium prices through time. First, the consumers question naire that is discussed in Chapter 4 asked the respondents to state the date of sale and the purchase price of their unit. This provided 2 02 random responses in Metropolitan Vancouver and Victoria. The second data source was the Land Registry Offices' records from which the transaction histories of 895 units were collected. These were again confined to Metropolitan Vancouver and Victoria. While the Land Registry Office data has proven to be accurate in the past"^ caution should be used when relying on this infor mation. As the data were collected during a period of extensive condominium development there is a large representation of initial sales from developers much more, so than, would... generally be., the. case for housing market sales data. Seventy-four percent of pur chases listed in the consumers survey were from the developer. Similarly, seventy-eight percent of the units examined in the L.R.O. records had transacted only once since their creation and hence must have been purchased from the developer. The two condominium price series are presented in Table 15 in conjunction with a price index of single detached dwellings in Metropolitan Vancouver and secondly with sales information from the Multiple Listing Service, also in Metropolitan Vancouver. Some discussion of the two non-condominium price series is necessary before any comparisons are carried out. The single detached price index was compiled from the Land TABLE 15 CONDOMINIUM AVERAGE SELLING PRICES METROPOLITAN VANCOUVER AND VICTORIA 1969-77 LAND REGISTRY OFFICE DATA CONDOMINIUMS ONLY AVERAGE PRICE SINGLE DETACHED PRICE INDEX CONDOMINIUM OWNERS SURVEY AVERAGE PRICE M.L.S. DATA SINGLE DETACHED AND CONDOMINIUM AVERAGE PRICE YRAR METRO VANCnnVRR METRO VICTORIA WEIGHTED AVERAGE METRO VANCOUVER METRO VICTORIA AND VANCOUVER METRO VANCOUVER 1969 18,512 (100) N/A 18,512 (100) 100 17,900 .(100) 23,939 (100) 1970 21,452 (116) N/A 21,452 (116) 104 22,900 (128) 24,239 (101) 1971 21,197 (115) N/A 21,197 (115) 106 21,233 (119) 26,471 (111) 1972 23,345 (126) 23,128 23,319 (126) 126 25,970 (145) 31,465 (131) 1973 27,8i'0 (150) 32,077 28,074 (152) 148 32,468 (181) 41,505 (173) 1974 39,237 (212) 33,376 37,887 (205) 207 40,665 (227) 57,861 (242) 1975 42,773 (231) 43,467 42,856 (232) 212 49,081 (274) 63,169 (264) 1976 44,764 (242) 51,343 46,549 (251) 245 (JULY) 49,494 (276) 68,693 (287) 1977 45,851 (248) 58,874 50,091 (271) N/A 49,937 (279) 70,500 (295) Registry Office records in the same manner as was done for the condominiums ( L.R.O.)."1"'1' The comparability of the two is limited by the quality differences in the two products caused by the condo miniums being mainly new units (discussed above) while the single detached units were mainly resales of existing units. Despite this limitation the single detached index provides the best com parison in terms of the choice offered to consumers between the two markets. The Multiple Listing Service (MLS) data contains three major problems: one, it does not include the White Rock or Surrey areas of Metropolitan Vancouver, two, it includes all sales made through MLS including condominiums, cooperative hous ing , single detached dwellings, and revenue property (both residential and commercial) (the majority however are.single detached or condominium units), finally, it has been shown that the percentage of the total market sales conducted through the 12 MLS varies with the conditions of the market. Overall, ... "the multiple listing service data are not consistently represen tative.. ."^ Despite these limitations the MLS data is widely used and therefore it has been presented. The first point to note on Table 15 is the rapid increase in price of condominiums in Metropolitan Vancouver and Victoria over the 1969 to 1977 period. Combining both areas, prices increased from an average of $18,512 to $50,091 according to the L.R.O. data and from $17,900 to $49,9 37 according to the Owner's Survey data. The greatest increases took place from 1969 to 1974 and have since then moderated, particularly in Metropolitan Vancouver. 42 . The rate of price increases did not decline as much in Metropoli tan Victoria from 1974 to 1977. This coincides with proportion ate reduction in the share of new housing starts held by condo miniums in this area that was noted in Section 2.3. The average selling price in Metropolitan Victoria in 1977 was considerably greater than that in Metropolitan Vancouver ($58,814 versus $45,851). One of the more common reasons cited for purchasing a condominium is to establish an equity position in the housing market that can later be used to trade up to a single family detached dwelling (See Chapter 4). The success of this strategy will be based on the relative rates of change of the condominium and single detached prices. Comparing the condominium L.R.O. data for Metropolitan Vancouver with the M.L.S. series one can see that on the average, condominium prices have not increased at the same rate as the M.L.S. average, by inference single detached prices must have increased more than the M.L.S. average. Hence condominium prices have not kept pace with single detached prices. Such a conclusion is suspect however having realized the limitations of the M.L.S. data and the contradictory evidence presented by the single detached price index. Overall, from 1969 to 1976, single detached and condominium prices have moved in a parallel fashion, with condominiums in fact showing greater increases in several years. Such a finding leads one to conclude that condominium prices have maintained their relative position 43. in the housing market vis a vis the single detached prices. A more comprehensive study would be required however, before such a statement could be made without some reservations. The sample size from both the owners' survey and the Land Registry offices are not of a sufficient size to permit accurate cross-tabulations by type of structure. Once the sample is separated by type of structure, the frequency of sales in any given year for any single type of construction becomes too small to form accurate indices. However the data are at least sugges tive of some differences between the price level and price trend for different types of structures. During the period 1972 -1977, where the frequency of sales in the sample are the largest, one can observe a marginally higher rate of increase in. the value of townhouse units relative to low-rise and high-rise units. The difference is not substantial but based on the limited evi dence one can conclude that townhouse units are becoming more expensive relative to other types of development. This conclusion is based on similar evidence from the two price data samples. The two series of price data also indicate that units located in high-rise projects had a higher value than units in either townhouse or low-rise units for the three years 1972 - 1974 but that townhouse units had the highest average value for the most recent three years, 1975 - 1977. In each year, 1972 - 1977, units located in low-rise units had the lowest average value and the lowest rate of increase over the six years. In order to obtain a further indication of the change in condominium values, all properties in the Land Registry office sales price data which sold more than once was used to measure percentage changes in value. This provided a total of 201 repeat sales of individual condominium units in the Metro politan Vancouver and Victoria areas. The percentage increase for these properties is indicated in Table 16. Because of the limited number of transactions, no breakdown could reasonably be undertaken for the two metropolitan areas. Table 16 is interpreted as follows: the row indicates the year the strata unit was purchased and the column gives the year of resale. The figures in brackets are the number of properties in each category while the figures under the "%" sign indicate the average rate of increase (or decrease) for those properties over the period in question. While there is not enough data to provide statistically valid results the trend is supportive of the overall price trend noted previously. i Those purchases made prior to 1974 enjoyed substantial increases in value upon resale. This corresponds to the rapid price increase over this period. Those units purchased in 1974 still enjoyed some, though moderated, increased prices. The same can not be said for the purchases made in 1975 or 1976. The increases were under 4% in all cases and for those units bought in 1975 and sold in 1977 there was a 1% loss in value. Eighteen percent of the resale transactions since 1974 occurred at a loss in value and 80% of all transactions that involved a loss in capital value occurred during this period. This again TABLE 16 45. PERCENTAGE INCREASE IN RESALE PRICES METROPOLITAN VANCOUVER AND METROPOLITAN VICTORIA Year of Purchase 1973 Year of Resale 1974 1975 1976 1977 1968 % 32 (1) %_ %_ 1969 112 .(1) 159 (1) 163 (1) 1970 12 (2) 118 (2) 132 (1) 1971 30 (6) 67 (6) 91 (3> 115 (3) 1972 8 (3) 51 (6) 87 (7) 85 (6) 186 (1) 1973 37 (19) 39 (16) 58 (12) 74 CD 1974 16 (43) 16 (24) 27 (2) 1975 3 (31) -1 CG) 1976 2 (7) : Includes all properties sold more than once in the random selection of 895 condominium units in the Land Registry offices for Victoria, Vancouver and New Westminster. Figures in brackets indicate number of sales included in these average rates of increase. reflects the reduced rate of price appreciation that has occurred in the last few years. It is also reflective of the current large existing vacant stock of condominiums that will be discussed in the next section. 2.6 Current Situation The current market situation for condominiums is very poor. This is evidenced by numerous factors, many of which have already been mentioned: a) for the first time since the introduction of the concept, the production of condominiums will decline in absolute terms in 1977, b) the rate of price increase has reduced substantially from the pre-1974 level and some units are being traded at a loss in capital value, c) CMHC has estimated there are 1638 newly completed and unoccupied condominiums in Metropolitan Vancouver and a further 311 units in Metropolitan Victoria as of June, 1977, this includes only the units that have been on the market for six months or less. Further, the number of newly completed and unoccupied units in Metropolitan Vancouver have been approximately 1600 since mid-1975, d) the area of classified newspaper advertising for new condominium projects in the Vancouver Sun newspaper as of April, 1977 is double that of April, 1975, it now comprises 9h patjfes, 47. e) an undetermined number of condominium units are being rented and the evidence would indicate it is substantial. 14.4% of the occupants surveyed (Chapter 4) were tenants. The developers' survey (Chapter 5) revealed that 1544 units or 23% of the respondent firms production of the previous 2h years was being rented. (as of July, 1977) (A further 30% of the developer's production was vacant and unsold.) finally f) two of the top five firms, in terms of production of units, in the province have indicated they are leaving the condominium development business. These depressing statistics should not be taken as indica tions of an upcoming demise of the condominium market. Rather the condominium market is experiencing a low level of activity as are other sectors of the housing market but it is further complicated by a large existing stock. Once the large inventory is reduced the condominium market should behave as the other sectors of the market. 48. Footnotes 1. Rosenberg, Alvin B., Condominiums in Canada, Canada Law Book Ltd., Toronto, 1969, P. 1-6. 2. Condominium Research Associates, National Survey of  Condominium Lenders, Central Mortgage and Housing Corporation, Toronto, 1970, P. 47. 3. Rosenberg, P.G. 4. Roberts, R.A., "Condominium Housing in Metropolitan Vancouver", M.Sc. Thesis, University of British Columbia, 1973, P. 19-25. 5. Baxter, David, "The British Columbia and Vancouver Housing Markets: Short Run Realities and Long Run Trends," a paper presented at The Economic Outlook for the Real Estate Industry in British Columbia forum, presented by Executive Programmes, Faculty of Commerce and Business Administration, University of British Columbia, Vancouver, December 14, 1977, P. 13. 6. Ibid, PP. 12-14. 7. Goldberg, M.A. and Ulinder, D.D., "Residential Developer Behaviour: 1975", Housing: It's Your Move, Volume II, Technical Reports, The Urban Land Economic Division, Faculty of Commerce and Business Administration, University of British Columbia, 1976, P. 295. 8. Central Mortgaae and Housing Corporation 9. Baxter, op. cit., P. 14. 10. Hamilton, Stanley W., "House Price Indices: Theory and Practice", Housing: It's Your Move, Volume II, Technical Reports, The Urban Land Economics Division, Faculty of Commerce and Business Administration, University of British Columbia, 1976. 11. Subocz, Irene, "House Price Indices", M.Sc. Thesis, University of British Columbia, 1976. 12. Hamilton, "House Price Indices: Theory and Practice", P. 415. 13. Ibid. CHAPTER 3 BRITISH COLUMBIA STRATA TITLES ACT 3.1 Introduction The British Columbia Strata Titles Act1 has been in effect for eleven years yet there is still some confusion regarding the con cept involved. It is therefore necessary to provide a discussion of the Act and its terminology before examining the empirical data which comprises the bulk of this study. The following will outline the basic terminology of the Act and the rights and responsibilities of those involved in the strata title projects. This is not meant to be a detailed examination of the Act and all its implications but rather a general overview to provide the reader with a basic understanding of the legislation. 3.2 General Concept The strata title or condominium (as it is more commonly known) concept is a form of ownership in real property. It consists of the combination of a fee simple ownership of individual areas with in the larger area with the remaining portion owned by all the individual owners as tenants in common. The Strata Titles Act pro vides the legal foundation for this arrangement plus a means of effectively managing and operating the project. 50. One of the most common mistakes is believing that a condomin ium refers only to a specific type of structure or use (e.g., resi dential townhouse). This is not the case as the Act allows for any style of building or simply bare-land to be used as a condominium. Further, the type of use is unrestricted and may be applied to such types as residential, commercial, retail, industrial, recreational, or a mixture of uses. While the Strata Titles Act provides for a virtually unlimited array of project styles, they remain under local regulation (e.g., zoning) as to how and where they are imple mented . The areas that are owned in fee simple are termed "strata lots" or "strata units". They are issued individual certificates of title which enables them to be mortgaged, charged, conveyed or dealt with in the same manner as any fee simple interest . (There are some exceptions to this which will be dealt with later.) The Act also provides for the units to be assessed and taxed in an individual manner-^. Herein lies the basic difference between a cooperative form of ownership and a condominium. All the property in a co operative is under a single title with the residents purchasing a right to occupy a unit. Each unit cannot therefore be dealt with individually as it does not have a separate title. Any area that is not specifically included in a strata lot is owned by all the unit owners as tenants in common and is termed the common property, common areas, or common facilities^- The common property is governed by the strata corporation which is made up of all the strata lot owners. It is "responsible for the enforcement 51. of the by-laws, and the control, management, and administration of the common property, common facilities, and the assets of the 5 strata corporation." The common property may be mortgaged, con veyed or otherwise dealt with separately from the individual units under the direction of the corporation. 3.3 Definitions Before proceeding further, some brief definitions will be supplied which will facilitate the discussion of the Act later. (1) Bare-land Strata Plan: means a strata plan on which the boundaries of the strata lots are defined by reference to survey markers; no build ing or structure is supplied. (2) Support Strature Strata Plan: means a strata plan in which the owner-developer intends to pro vide only support structures, upon which improve ments may be constructed. These may be in the form of concrete slabs or wood planks.set in the ground. (3) Phased Strata Plan: means a strata plan which is intended to be developed in successive stages. See Part II of the Strata Titles Act. (4) Leasehold Strata Plan: means a strata plan in which the land contained therein is leased from the Crown, Federal Crown, or a municipality, regional district or other public authority for a term of at least 50 years. Upon the deposit of a leasehold strata plan the registered ground lease is converted to individual ground leases applicable to each unit. See Part III of the Strata Titles Act. (5) Unit Entitlement: means that figure which is stipulated in the strata plan for each unit and is generally based on the relative square footage of the unit to the total square footage of all strata lots in the strata plan. The relationship of the lot's unit entitlement to the total unit entitle ment give the lot's share of the common expenses, shares of the common property and assets of the strata corporation, and share of any debt or liability of the strata corporation. (6) Common expenses: means those expenses which apply to the operation and management of the common areas, common facilities and common assets of the strata corporation. (7) Contingency Reserve Fund: means a fund for the non-annual expenditures of the strata corpora tion for repair, maintenance, and replacement of the common property, common facilities, and other assets of the strata corporation. It is collected from the owners on the basis of the strata lot's unit entitlement. 3.4 Creation of a Strata Plan A condominium or strata project is created by the filing of a strata plan in the Land Registry Office^. Before the plan will be accepted by the Registrar, certain conditions stipulated in the Strata Titles Act must be met. These conditions provide the basis for identifying the project, the units, the voting rights of each unit, and the proportionate share of expenses relating to the common property for each unit. The requirements for filing a strata plan are contained in Sections 2 and 3 of the Act and are as follows. Subsection 2 (2) states that the land included in the strata plan must be a single parcel or if there are several parcels, they must be part of a strata plan. Title to the land must be registered in the name of the owner-developer except for a leasehold strata plan where the owner-developer must be the registered lessee. The major requirements under Section 3 stipulate the following must be included in the plan:-(a) the plan must delineate the plane boundaries of the land included in the strata plan and the location of the building in relation thereto, (b) include a drawing illustrating the strata lots and distinguishing the strata lots by numbers or letters in consecutive order, (c) subject to Subsections 3 (3) and 3 (4), define the boundaries of each strata lot, (d) have endorsed upon it a schedule specifying the unit entitlement of each strata lot, and (e) have endorsed upon it a schedule... specifying ... the share of each owner as a tenant in common of the property and assets of the strata corporation upon the destruction of the buildings...calculated in the proportion that the value of each strata lot bears to the total value of all strata lots in that strata plan. The definition of the boundaries referred to in (c) (above) are the centre of the floor, wall, or ceiling of the unit or "where the owner-developer intends to provide only support structures, on a horizontal plane by reference to the support structure, and for this purpose, unless otherwise defined in the strata plan, the boundaries shall be deemed to extend vertically upwards and down-7 wards without limit". Areas such as balconies, private yard areas, storage spaces, garages and the like may be included as part of a strata unit or part of the common property but they cannot form separate strata lots unless they are related to non-residential use. The boundaries of these parts may be defined in the same manner as the strata units or "...in any manner approved by the Registrar."0 In addition to the requirements of the plan itself, further approvals are necessary which will vary with the type of develop ments . 54. (a) New Building: a land surveyor must certify the building is a new development that has not been previously occupied. (b) Conversion of an Existing Building to a Strata Project: approval by an approving authority is required. This was included to provide a means of controlling the conversion of rental build ings during a period of very low rental vacancies. The authority is allowed great discretion in approving or rejecting the conversion but is charged with certain duties:-(i) that the building "substantially comply with the applicable by-laws of the municipality ..." (Subsection 5 (2)) or the National Building Code if the project is located outside a municipality, (ii) the approving authority shall consider (a) the priority of rental accommodation over privately owned housing in the area, (b) the proposals of the owner-developer for the relocation of persons occupy ing the buildings, (c) the life expectancy of the building. (iii) the approving authority may consider any other matters which in its opinion are relevant. These provisions have resulted in the elimin ation of conversion in some municipalities and the severe curtailment in others. (c) Phase Strata Plan: in filing a phased strata plan, the owner-developer must file a "Declaration of Intention to Create a Strata Plan by Phased Devel opment" (Fourth Schedule, Form E). The declaration must specify the number and the details of each phase, an estimated schedule of development, the unit entitle ment of each phase and the total unit entitlement of the completed development. The approving officer must approve each phase separately and ensure that they each comply with the details of Form E. (d) Support Structures: prior to the Strata Titles Amend ment Act, 1977 (Bill 75), strata projects supplying only support structures did not require approval. This allowed owner-developers to avoid municipal or regional subdivision by-laws by creating a strata title "subdivision." The amendments require the approval of such plans and is retro active to June 24, 1977. (e) Bare-land Strata Plan: the amendments provide for the stratafication of raw-land which had previously : been accomplished under the guise of support struc tures - only wood planks or small concrete slabs would be provided with the majority of the lot un developed. Bare-land strata plans will also require the approval of the approving authority before filing in the Land Registry Office. 3.5 Owner-Developer The features of the Act relating to the owner-developer are not limited to those required for the filing of the plan. They must also file a prospectus, develop an initial operating budget for the project, and face very special requirements when creating a phased development. These aspects will be discussed in this section. Where the strata project is a new development or a conversion being offered for sale for the first time and five or more units have been created, a prospectus must be filed under the Real Estate Act^- A copy of the prospectus must be provided to each purchaser and shall include, among others, the following facts:-(a) name, address, and past dealings of the promoter, (b) a general description of the subdivision, (c) all encumbrances of the title(s), (d) particulars of the developer's warranties or financing, if any, (e) a proposed operating budget, Cf) a summary of the condominium management contract, and (g) the proposed by-laws. The prospectus is similar to that required for a normal sub division and should not be a significant obstacle to development. It will also serve to inform the purchasers of the project and the rules which will govern their behaviour should they decide to pur chase. This can only increase the general level of satisfaction they will experience in the future. (See the results of the Owners' Survey - Satisfaction, Chapter 4.) After the construction of the project is completed and the units are ready for sale, the owner-developer manages and operates the common areas in place of the strata council. Under the present Act he is required to relinquish these duties to the interim strata council which is elected at the general meeting of the purchasers. The meeting must be called within three months of the first convey ance of a lot. After 85% of the lots are sold, or after twelve months from the date of registration of the plan, the interim coun cil is replaced by an elected permanent council. The new amend ments streamline this procedure by eliminating the distinction be tween interim and permanent councils and requiring the first general meeting of the owners to be held once 60% of the lots have been con veyed or after nine months from the date of registration of the plan 10. The Act also requires the developer to prepare an operating budget for the project for a nine-month period and to revise it every three months. If the actual expenses, until the strata council assumes the management duties, exceed those estimated in the budget, the developer is responsible for any excess. If the estimated expenses exceed the actual, all the owners, including the owner-developer, receive a rebate in proportion to their unit entitlement and their period of tenure. Naturally the developer is responsible for the common expenses attributed to any unsold units. The development of a phased strata plan places extra require ments on the owner-developer. They are intended to protect the purchasers of the initial stages, however, they also reduce much of the flexibility of a phased development. Previously the requirement of filing a Form E of the Fourth Schedule in creating a phased plan was noted. If the owner-devel oper does not wish to proceed with phases subsequent to the first one according to the timetable outlined in the Form E, he may apply to the approving officer for an extension. This may be granted at the officer's discretion for up to one year. If the owner-devel oper elects not to go ahead with the subsequent phases, the strata corporation created in the initial stages may apply to the Court for an order to ensure the proposed common facilities not yet con structed will be provided11. The strata corporation may also apply 12 for the following stages to be completed in a "reasonable time" 58. or that the developer elect not to proceed. To ensure the common facilities can be provided by the owner-developer he is required to post a bond, letter of credit, or other security to cover the cost of the common facilities. The security is held by the municipality or regional district (whichever applicable) and may be released only after the facility is completed or the strata corporation grants its release. The owner-developer is further responsible for the common expenses applicable to the common facilities developed in the initial stages in proportion to the unit entitlement of the phases not yet built. The amendments also requires that where the common facilities are provided in the initial stages and the owner-devel oper elects not to proceed with the subsequent phases, "he shall contribute to the common expenses in proportion to the unit entitlement of the strata lots of the phases that are not built," 13. Presumably, though not explicitly stated, this will be for the life of the project. 3.6 Strata Corporation (Operation Management) The strata corporation is established on the deposit of the strata plan and is comprised of all the owners of the strata lots. It is not regulated under the Companies Act but does have perpetual succession, may sue and be sued, and may sue on the behalf of an 14 individual lot owner even when it is not involved in the action The corporation is charged with two basic duties:-59. (1) the control, management and administration of the common property, and (2) the enforcement of the by-laws. Each of these functional areas will be discussed in turn but it should first be pointed out that the daily business of the corpora tion is conducted by the strata council. The strata council is elected from the purchasers of the strata lots; this excludes by definition, the owner-developer from being elected to the body. The council may see to the "exercise and per-15 formance of the powers and the duties of the strata corporation" but it is not empowered to act where the by-laws or Act requires the consent of the corporation by a vote. For example, only the corporation is entitled to amend the by-laws of the corporation. In respect to the management of the common areas, the strata corporation is required to:-(1) maintain insurance on the buildings, common facilities and any insurable improvements owned by the strata corporation to the full replace ment value (Subsection 19 (a)), (2) properly maintain the common property (Subsection 19 (d)), (3) establish a fund for administrative expenses (Subsection 20 (a)), (4) establish a contingency reserve fund (Subsection 20 (b)), and (5) raise the amounts necessary for (3) and (4) by levying contributions on the owners in proportion to their unit entitlement (Subsection 20 (d)) . Further, the strata corporation may acquire, transfer, charge, or 60. grant easements or restrictive covenants on the common property and amend the by-laws, rules and regulations by a special resolution of the owners . The strata corporation is also entitled to enter into contracts "...affecting the security and.maintenance of the common property II 17 •«• . This allows them the option of managing the project them selves or hiring a professional management company. If a management company is employed it usually is responsible for the daily functions such as bookkeeping, supervision of maintenance, and the handling of any complaints or disputes. The final control, however, remains with the council or corporation regarding the enforcement of the by-laws and the setting of policies. The blame for any inefficient management must, therefore, be shared by the professional firm and the corporation. The contracts entered into between the management company and the strata corporation may be cancelled by either party on three months' notice without incurring any liability for breach of con-18 tract . This clause was originally intended to allow the corpora tion out of "sweetheart" contracts made between the developer and the management company but it is also used to get rid of management companies that prove to be unsatisfactory. Interestingly, several management companies revealed they have also used this section to break contracts with strata corporations which they found to be incompatible with their management style. One aspect regarding condominium management firms which has caused some comment is the lack of regulation over their establish ment or behaviour. Presently there is no control under either the Strata Titles Act or the Real Estate Act over the qualifications needed to establish such a firm or the handling of the considerable amount of funds represented by the budgets of their clients. This could be the source of considerable abuse which should be corrected by the appropriate legislation. The by-laws of the strata corporation are established for "... the control, management, administration, use, and enjoyment of the 19 strata lots and common property..." . The strata corporation is charged with the duty of enforcing the by-laws, rules and regula tions by any means necessary, including the removing of privileges in the use of certain facilities or the fixing and collecting of 20 fines . Generally, the council acting on the behalf of the cor poration, provides the offending owner a chance to correct the pro blem and only if the problem reoccurs are fines imposed. Removing the use of certain facilities is usually too difficult to police and is therefore not often used. Where an owner defaults in the payment of his share of the common expenses the strata corporation has two options under Section 21. Firstly, upon a resolution passed by a majority and after seven days' notice to the owner, the strata corporation may auth orize the termination of the utility services to the defaulting owner. Such action has been seldom used and will be removed in the new amendments. The second method is more commonly used and more effective. On default of payment of the common expense charges or of fines levied, the corporation may file a certificate in Form B of the Fourth Schedule which is a lien against the title of the strata lot. The lien can be the amount unpaid plus "...the land registry fee and 21 the legal and administrative costs of filing the certificates" and it shall have priority to every other lien except those in favour 22 of the Crown (except mortgages in favour of the Crown ) and those created under the Mechanics Lien Act (Subsection 21 (3)). The point that makes this a truly effective enforcement method is that the lien is enforceable by a Court ordered sale of the strata lot after one month's notice to the owner. The strata corporation is virtually guaranteed that they will receive their money if they act under this section. If the number of delinquencies are significant, however, the inherent time lags in the process may cause some cash flow problems. The corporation must, therefore, act expediently in the performance of their duties to ensure the situation does not become chronic. Similarly, the enforcement of the by-laws, rules and regulations must be carried out efficiently but tempered with the knowledge that overly strin gent regulations will cause as much dissatisfaction as too lax enforcement. The power of the strata corporation is not limited to the matters involving the common areas and property but also to within the strata lots themselves as will be seen in the discussion of the owner-purchaser. 3.7 Owner-Purchaser The duties of the owners are contained in the by-laws and include:-(1) a duty to maintain the strata lot, (2) receive the written permission of the strata council before undertaking any alteration to his strata lot, (3) he shall not make undue noise in or about any strata lot or common property, (4) keep any animals on his strata lot or the common property after notice on that behalf from the council, (5) if he wishes to rent his strata lot for more than one month, he shall submit a Form D of the Fourth Schedule notifying the strata corporation of his intent, and (6) comply strictly with these by-laws, including the payment of the common area charges and con tingency reserve fund levy. The owner is subject to a considerable amount of regulation, however, in doing so, a reasonable life style is ensured for the majority. The owner also has the right that the strata corporation perform its duties and obligations which is enforceable by a Court ordered man-. . 23 datory injunction . The amendments will also provide protection to the owner in cases of oppressive acts by the strata corporation, council, or class of owners on one or more owners including himself. 24 In such an instance, the matter may be referred to arbitration or to the Court with a view to preventing or remedying the matter. The owner will be further protected by the amendments in instances where, subsequent to the conveyancing from the owner-developer, a charge is filed against the strata lot under the Mechanics Lien Act. The new Section 41 A will provide for a 15% holdback of the full purchase price for 31 days. Payment into court of this holdback discharges all liens (even if the amount of the liens exceed the amount of the holdback) against the lot and its share of the common property. Further, no Mechanics Liens can be filed later than 31 days after the conveyancing date to the pur chaser. This section provides ample protection to the purchaser but may cause the subcontractors and suppliers to be more strict on their extension of credit, particularly to small developers. Section 18 is concerned with the restrictions on the dealings with the strata lot. Subsection 18 (1) states:-"No by-law...operates to prohibit or restrict a de valuation of a strata lot or any transfer, lease, mortgage, or other dealing with a strata lot or to destroy or modify an easement implied or created by this Act." While this section protects the right of an owner in the alienation of the lot, it does not eliminate the power of the corporation to restrict the use of the lot The most contentious issue over this point is the development and continuation of "adult only" projects. On the one hand a by law restricting children from inhabiting the units can be viewed as a restriction of usage. From the vendor's viewpoint, however, it is a restriction on his right to sell to whomever he wishes, includ-65. ing families with children. The Human Rights Code does not inter cede as it "...permits, tacitly, discrimination in the purchase (and letting) of property on the basis of age." Arguments can be advanced for both sides but as yet the issue does not seem to be resolved. Clarification of the Act is therefore recommended. The major exception to Subsection 18 (1) is that a by-law may be enacted by a corporation that is wholly or partially residential 27 that restricts the number of strata lots which may be leased This clause was included because many owners felt that tenants did not treat the common areas properly, have the proper respect for other residents' rights, or the owner-landlords would not be willing to maintain the common areas in the same manner as if they were resi dents. This protection may or may not be justified but it can create hardships where the market is "soft" and the developer or an owner is unable to sell his unit(s). The present legislation allows the strata council to make an exception or the strata corporation may amend the by-law to allow an additional number of units to be leased in such a situation. Significant changes to Section 18 are contained in the amend ments. A new section, Section 18 A, is proposed which attempts to allow the strata corporation to continue to control the number of units to be rented but also allows the owner-developer to stipulate a number of lots that may be leased for a specified period irregard-less of the by-laws. The intention of this amendment is to protect the developer in instances where the units are not being readily 66. absorbed into the market; however, it is likely to cause a good deal of confusion and may not protect the developer or the owners. The details of the new section (Section 18 A) are as follows:-(1) the by-laws of the strata corporation may restrict the number of residential strata lots leased by the owners (as before), (2) an owner-developer must disclose the number of strata lots he has leased or intends to lease and the dura tion of the leases to every purchaser or prospective purchaser in a "rental disclosure statement," (3) where a rental disclosure statement is filed, the strata corporation cannot restrict the conditions therein, even if the lots are later sold to another, (4) modification of the rental disclosure statement requires 75% approval of the owners, excluding the owner-developer and owners who are leasing (i.e., 75% of the owner-occupiers), (5) if the owner-developer is suffering "undue hardship" because he is restricted by a by-law from leasing and he cannot get approval of an amendment of the . rental disclosure statement by the owner-occupiers, he may appeal to the strata council for permission to lease the lot or lots and the council shall not "unreasonably refuse", (6) the council, if it so decides, may permit the leasing of one or more strata lots in contravention with the by-laws or may alter the rental disclosure statement without the owners' consent, (7) failure of the owner-developer to meet the require ments of this section is an offense and any agreement 1 to purchase between the owner-developer or owner and purchaser or tenant is unenforceable. The greatest shortcoming of this section is the lack of defini tion of "undue hardship" and "unreasonably refuse". Such ambiguity increases the uncertainty in the purchase and developments of condo-miniums and will likely be the source of significant legal dis agreements. The developer is faced with a further dilemma in specifying the number of lots to be leased and the duration of the leases. If he stipulates too few a number, he may end up with units he can neither sell nor rent. Also, he will alienate those purchasers looking for an investment or are unsure of their future plans and want the ability to rent the unit if necessary. Conversely, if he selects too large a number of units or too lengthy a duration he may alienate those looking for a project that contains strictly owner-occupiers. This may result in fractionalizing the market into an owner-occupier segment and an investor oriented segment. Much of the outcome will depend on eventual definition of "undue hard ship" and "unreasonably refuse". The Strata Titles Act provides guidelines on the purchase price and renewal rent on the expiry of the ground lease pertaining to a leasehold strata plan. Each strata lot may or may not have its lease renewed; if it is not renewed the lease is subject to the right to purchase by the lessor (under the new amendments the lessor must purchase the lot). The purchase price is to be stipulated as:-(a) "the price calculated on the basis set out in a schedule filed with the leasehold strata plan; or (b) if clause (a) does not apply, its fair market value, and, for the purpose of assessing its fair market value, the interest in the strata lot shall be evaluated as if the lease did not terminate..." . 68. In other words, if clause (b) applies, the lessor must pay the fair market value of the strata lot as if it were a fee simple interest. This is despite the fact that without such legislation the owner would have no legal interest in the strata lot on expiry of the lease. The amendments provide a basis to calculate the rent under a renewed lease which did not exist previously. The lease shall be on. the same terms and conditions as the original lease and the rent shall be determined by agreement between the lessor and lessee by the date of commencement of the renewal period. Failing this, it shall be determined by arbitration and is stipulated as:-"...(the rent) shall be the share of the current market rental value of the land included in the strata plan, excluding all buildings and improvements, apportioned to the strata lot in accordance with the schedule filed under section 3 (1) (g)." (The strata lot's share on destruction.) The lessee will only be required to pay a maximum rent in accordance with the land value if the lease is renewed. The lessor, however, must pay for the land which it already owns plus all the improvements if the lease is not renewed. The balance is therefore greatly in favour of the lessee. FOOTNOTES Statutes of British Columbia, 1966, Chapter 46, Now S.B.C. 1974, C. 89. Section 2. Section 33. Section 1. Section 9 (4). Section 2(1). Sections 3 (3) and 4 (b) . Section 4 (c). Statutes of British Columbia, 1974, Chapter 77, Real Estate Amendment Act, Section 51 (6). Strata Titles Amendment Act, 1977, Bill 75, First Schedule, Section 22. Section 43 (5). Section 43 (8). Section 45 (5) (d). Section 9 (5) . First Schedule, Section 18 (b). Sections 12, 13, 14, and 17. Section 10. Section 10. Section 17 . Section 3 (i) and First Schedule, Section 19 (2) (d). Section 21 (6). Strata Titles /Amendment Act, 1977 , Bill 75, Clause 18. Section 23. Section 24. The Strata Titles Act, Pavlich, D-J.., University of British Columbia, Unpublished, p. 40. Ibid., p. 40. Section 18 (2). 71. CHAPTER 4 OWNERS' AND TENANTS' PROFILE 4.1 Introduction Condominiums, while relatively new in comparison to other types of housing tenure are an increasingly common and accepted form of housing in North America. Several studies have been done in Canada and the United States to identify such items as the socio-economic profiles of the owners, their reasons for purchase, and their satisfaction with the units. One may therefore question the relevance of yet another study. The position is taken that significant changes have occurred in the housing market which necessitates further investigations. The enabling legislation for condominiums in British Columbia was first introduced in late 196 7. At that time, condominiums were thought to provide a major breakthrough in housing: an opportunity for new forms of housing structure; lower housing costs for various purchasers; and lower operating costs. The market was understandably hesitant in accepting this new form of housing tenure but by 1970 condominiums represented a signifi cant force in the housing market. The drastic increase in condo miniums which has occurred in the past ten years gives rise to some important social and economic issues. What type of people are buying condominiums? Who is living in the condominium units? What is the reason for purchase? Have they proven to be a good investment? The most recent and directly comparable study is the 1973 study by Hamilton and Roberts"1" which examined the condominium 72. market in Metropolitan Vancouver. During that year 4486 units existed in the area which represented 29.0% of the new home ownership units produced during the year. By 1977, over 46,000 condominium units existed in British Columbia of which 25,214 were located in Metropolitan Vancouver. The proportionate share of the new home completions in 1976 increased to 32.0% for the province and 44.1% in Metropolitan Vancouver. In spite of these impressive statistics the condominium market is presently experi encing some difficulty with a substantial oversupply and corres ponding soft prices, conditions which did not exist in 1973. This chapter will provide a socio-economic profile from a sample of existing owners, their motivations for purchase, and their level of satisfaction. Insights will also be supplied as to the owners' likes and dislikes of the units and the projects which should provide developers with information needed to meet the desires of the consumers in the future. 4.2 Previous Studies Several recent studies have dealt with the condominium 2 market in Metropolitan Vancouver; notably, Eger (1976) , 3 Hamilton and Roberts (197 3) , and Hamilton, Davis, and Lowden 4 (1971) . The Condominium Research Association published a 5 study in 1970 on condominiums in Canada while Norcross investi gated townhouse condominiums in Washington D.C. and California in 1973 . A synopsis of their findings is presented in Appendix 1. The results of the earlier studies (1970 and 1971) indicated that the condominium market was dominated by young families in the early stages of their life cycle. Their incomes were in the mid-range for all households although there was a predominance of professional and managerial household heads. The majority were first time purchasers who selected condominiums over single family homes due to the economic advantages and secondly for maintenance-free living. The later studies (Norcross, Hamilton and Roberts, Eger) showed that the condominium market was gradually appealing to a wider age distribution of purchasers, although the dominance of average incomes and professional occupations remained. The Hamilton and Roberts study identified two submarkets; young, first time purchasers in the early stages of their life cycle and secondly an older group with higher incomes moving from their single detached home and purchasing apartment units. Again the two primary reasons given for purchasing a condominium rather than a.single family, house were the economic advantages and the freedom of upkeep and maintenance. Thirty percent of the owners reported by Hamilton and Roberts were over 49 years old. This is a substantial increase from the study by Hamilton, Davis, and Lowden (1971) that revealed only 10% in this age group. Table 17 shows that the older people were located mainly in apartment-styled condominiums while the younger groups were found mainly in townhouses. With the increase of older purchasers the number of purchasers that had previously owned a home increased from 14% in 1971 to 36.4% in 1973. A change in the distribution of incomes between the 1971 and 1973 study is also noted. In 1971, 68% of the family incomes were in excess of $10,000 per year while 65% of those in the 1973 study were less than $12,000. Hamilton and Roberts also evidenced a much higher percentage of lower income households in apartments than in townhouses reflecting the age distribution and the number of single occupants in this structure type. There was a low incidence of family units in condominiums (50%) revealed by Hamilton and Roberts. Of these, there was an average of 0.86 children per unit. The largest average number of children (excluding low cost developments) were found in town-houses (1.05 children per unit). It was expected that the family size in townhouses would increase over time while the apartment households would be fairly stable based on the relative age distribution of the two structure types and the greater stability of townhouses for childrearing. Different data sources were used in each of the previous studies that concerned condominiums in Metropolitan Vancouver. Hamilton, Davis, and Lowden assembled their data from CMHC and NHA loan application forms. This was an acceptable method as virtually all the condominiums at that time were financed or the financing insured through these two sources. The major draw backs were the exclusion of those that paid all cash for their unit and the motivations and the attitudes of the purchasers were not available. Hamilton and Roberts corrected these deficiencies by utilizing questionnaire surveys. Both of these studies analysed the data by cross-tabulating the various factors. The data for Eger's study was collected from loan application forms of institutional lenders and included single family detached houses as well as condominiums. The purchasers of both dwelling types were profiled using discriminant analysis. None of these studies included an examination of tenants residing in the TABLE 17 75'. Distribution of Ages of Household Heads (Hamilton and Roberts) Under 3 0 30 - 39 40 - 49 Over 49 Average No. % No. % No. % No. % Age NHA Town House 69 34.8 72 36.4 30 15.2 27 13.6 35.7 NHA Apartment 10 26.3 2 5.3 5 13.1 21 55.3 47 .2 NHA Mixed Town House & Apartment 8 28.6 8 28.6 3 10.7 9 32.1 39.8 Conventional Town House 13 38 .2 6 17.6 3 8.8 12 35.3 39.5 Conventional Apartment 19 15.6 18 14.7 8 6.6 77 63.1 50.1 Total Town Housed) 82 35.3 78 33.6 33 14.2 39 16.8 36.3 Total Apartment(1) 29 18.2 20 12.5 13 8.1 98 61.2 49.4 Total 119 28.3 106 25.2 49 11.7 146 34.8 41.5 NHA Low-Cost(2) 38 49.3 25 32.5 10 13.0 4 5.2 32.5 Grand Total 157 20.5 131 26.4 59 11.9 150 30.2 •40.1 Notes: (1) These figures exclude the mixed town house and apartment projects. (2) All data above this row exclude the low-cost housing data. Ti condominium units. 4.3 Sampling Process In order to provide current data concerning condominiums in British Columbia which could provide useful insights into the current market and permit comparisions with earlier studies, two questionnaire surveys were conducted during the summer of 1977. The surveys of condominium occupiers were limited to the Metropolitan Vancouver and Victoria areas. Questionnaires were distributed to occupiers in a total of 15 7 randomly selected condominium projects, a sample representing 25% of the projects of ten or more units. The sample was then stratified to represent five areas as follows:-1. Vancouver City 40 Projects 2. Metropolitan Vancouver: North Shore 25 Projects 3. Metropolitan Vancouver: Low Growth Area 30 Projects 4. Metropolitan Vancouver: High Growth Area 30 Projects 5. Victoria 32 Projects Total 157 Projects The Low Growth Area of Metropolitan Vancouver included the municipalities of Burnaby, Surrey, New Westminster, and Coquitlam and the High Growth Area represented the municipalities of Richmond, Delta, Tsawwassen, Port Coquitlam, Port Moody, Langley, and White Rock. In each case, growth was measured in terms of population, not condominium developments. The next step in the sampling process was to distribute questionnaires to every eighth unit in the projects. This resulted in a total sample of 895 units or 3% of all units in plans of ten units or more. Due to the length of the question naires, they were left, along with an explanatory letter, at each unit selected in the sample. As it was not possible to identify which occupants were tenants and which were owners prior to the survey, copies of both the tenant and owners questionnaires were enclosed with instructions to complete the appropriate one and return it by mail in the envelope provided. In order to provide maximum confidentiality, these questionnaires were not coded for area. Hence the sample results can only be interpreted for the combined areas. Given the prior response rate obtained by Hamilton and Roberts of 50% using a similar technique and the public's greater familiarity with condominiums, a 30% response rate was expected. In total, 202 owners questionnaires and 34 tenants questionnaires were returned providing a 26.4% response rate, very close to the expected. The number of responses represent 26.4% of all exist ing units in the sample but a somewhat higher proportion of occupied units since some projects were new and only partially occupied. The 236 occupant responses represent approximately 1% of all units contained in projects of 10 units or more. The sample was originally designed for statistical validity and the sample determined to reflect the expected response rate. The statistical validity of the results however, are impossible to ascertain in a quantitative fashion due to the survey technique. 78. The requirement of leaving the questionnaire and not having a 100% response may provide some, though unknown, bias. On a positive note, the general similarities between these findings and those of previous studies indicates they are highly reliable. 4.4 Owners' Profile There was a total of 202 usable responses from the Owners' Survey. As the data was often categorized into several groups and the total number of responses were limited, all the question naires were used even if some were partially incomplete. This resulted in the total number of responses varying slightly over different factors but does not affect the overall findings. The majority (80%) of the units in the sample were purchased after 1973. This ensures that any similarities between the findings in this study and those of Hamilton and Roberts are not due to the same population being sampled but rather there are actually similarities between the two separate populations. 4.4 (a) General Characteristics of Survey Respondents Thirty-three percent of the responses were from townhouses, 35% from low-rise apartments, 26% from high-rise apartments and 7% from mixed townhouse and apartment developments (mixed). No attempt was made to identify which units in the latter group were townhouses and which were apartments and due to their small number they will be excluded from the majority of the discussion but have been included in the tables separately for clarity. Of the townhouses, the majority were three bedroom units and overall they average 2.89 bedrooms per unit (Table 18). The low-rise 79. and high-rise apartments were more evenly divided between one and two bedroom units, averaging 1.67 and 1.63 respectively. The majority of households (77%) contained 2 adults while 20% were single adult households and 3% contained more than two adults. Furthermore, most households were childless (69%) while 15% had one child and 16% had two or more children. Of the single adults, 68% were women and 32% were men. As would be expected, given their larger size and greater suitability for families, the townhouses contained the highest average number of occupants (2.85) and average number of children per house hold (0.91). Apartments contained mainly singles and couples and had a low percentage of units with children, averaging 0.31 and 0.21 children for low-rise and high-rise units. Table 19 correlates the number of bedrooms with the number of occupants. If one were to assume that one bedroom is required for each couple or single adult and one for each child, the majority of purchasers (60.5%) have excess space. Only 9% are overcrowded and the balance of 30.5% have the "correct" number of bedrooms for the number of occupants. Comparing the average number of bedrooms with the average number of occupants by structure type (Table 18), indicates the greatest excess capacity exists in townhouses which average one bedroom per person. It is likely these people intend to expand their household size in the future. The ratio of persons to bedrooms is not as low in apartments where there is 1.33 persons per bedroom. TABLE 18 BASIC STRUCTURAL DATA Structure Type Town- Low- High- Total House Rise Rise Mixed Responses % % •. % % Number of Responses 32.7 34.7 25.7 6.9, 100.0 Number of Bedrooms 1 0.0 38.6 40.4 14.3 24.8 2 18.2 55.7 55.8 21.4 41.1 3 74.2 5.7 3.8 64.3 31.7 4 7.6 0.0 0.0 0.0 2.5 Total 100.0 100.0 100.0 100.0 100.0 Average 2.894 1.671 1.635 2.500 Number of Occupants Per Unit 1 7.6 18.6 23.1 14.3 15.8 2 33.3 64.3 65.4 57.1 54.0 3 30.3 8.6 3.8 14.3 14.9 4 24.2 8.6 7.7 14.3 13.9 5 or more 4.5 0.0 0.0 0.0 1.5 Total 100.0 100.0 100.0 100.0 Average 2.848 2.071 1.962 2.286 Number of Children 0 45.4 77.1 86.5 71.4 68.8 1 24.2 14.3 5.8 14.3 . 15.3 2 25.8 8.6 7.7 14.3 14.4 3 3.0 0.0 0.0 0.0 1.0 4 1.5 0.0 0.0 0.0 0.5 Total 100.0 100.0 100.0 100.0 100.0 Average 0.91 0.31 ' 0.21 0.43 4.4 (b) Socio-Economic Variables The socio-economic factors of the respondents are displayed in Tables 20 and 21 by age groups and by structure type. The data v/ill first be analysed by the age distributions to compile a general profile and then related to the structure types. 4.4 (c) Age The bi-polarization of the age groups as was found by Hamilton and Roberts and Eger was again evidenced here. Forty-two percent of the respondents were over 49 years old while 48% were below 40 years old. Only 9.4% of the respondents indicated the head of the household was between 40 and 49 years old. There is a significantly greater representation of those over 49 in this study than was previously reported (Table 22). This change may be explained in part by the inclusion of Victoria into the sample for the current study. Forty-five percent of Victoria's adult population (over 14 years old) is over 49 years old while 7 this group represents only 3 3% of those in Vancouver. 4.4 (d) Number of Children The majority of households (69.3%) were childless followed by those with one or two children. The highest average number of children were found in the 30-39 age group (0.71 children per household) and the 40-49 age group (0.63 children per household). The lowest average was that of the group over 49 years of age. The youngest age group had an average of 0.49 children which indicated the majority had not yet started their families. TABLE 19 Correlation Between Household Size and Number of Bedrooms Number of Number of Bedrooms Occupants 1 2 3 4 1 15 12 3 0 2 26 56 27 0 3 2 1 7I 18 3 4 5 8 M 2 5 0 0 T 2 roi 6 0 0 1 i i 0 NOTE: = "Correct" Occupancy Below the rectangles are overcrowded Above the rectangles have excess space TABLE 20 83. Profile of Condominium Purchasers by Age Groups Under 30 . 30-•39 40--49 Over 49 Income Group No. % No. % No. % No. % Under $8000 1 2 0 0 1 5 13 15 8001-16000 7 16 14 27 5 26 32 38 16001-24000 19 42 17 33 10 53 23 27 Over 24000 18 40 20 39 3 16 17 20 Total 45 100 51 100 19 100 85 100 Occupation Professional 18 40 26 50 8 42 26 30 Semi-Skilled and skilled 20 44 18 35 8 42 14 16 Unskilled 4 9 3 6 2 11 2 2 Retired 0 0 0 0 0 0 42 49 Other 3 7 5 10 1 5 2 2 Total 45 100 52 100 ' 19 100 86 100 Education Post Graduate 7 16 9 18 2 11 11 13 1-4 years Post Secondary 14 31 17 35 3 17 26 31 Vocational or Technical 11 24 11 22 4 22 10 12 High School or less 13 29 12 24 9 50 38 45 Total 45 100 49 100 18 100 85 100 Use of 2nd . Mortgage 22 49 19 37 9 47 12 14 Use of B.C. Govt. 2nd Mortgage 21 47 19 37 9 47 12 14 TABLE 20 Profile of Condominium Purchasers by Age Group Cont. Under 30 30 - 39 40 - 49 Over 4 9 Total" No. % No. ' % No. % No. % No. % Number of Children 0 30 66.0 29 56.9 13 68.4 68 79.1 140 69.3 1 9 20.0 11 21.6 3 15.8 8 9.3 31 15.4 2 5 11.1 11 21.6 2 10.5 10 11.6 28 13.9 3 1 2.2 0 0 1 5.3 0 0 2 1.0 4 0 0 1 2.0 0 0 0 0 1 0.5 Average 0.49 0 .71 0 .63 0. 33 0.48 TABLE 21 85. Basic Demographic and Economic Data - By Structure Type Structure Type Townhouse Low-Rise High -Rise . Mixed Total Age of Household Head No. % No. % No. % No. % No. Under 30 15 23 16 23 7 13 7 50 45 30-39 27 41 12 17 8 15 5 36 52 40-49 7 11 7 10 5 10 0 19 Over 49 17 26 34 49 32 62 2 14 . 85 Average 39.9 47.8 52.1 32. 9 45. Total 66 100 69 100 52 100 14 100 201 Education of Household Head Post Graduate 8 13 8 12 9 17 4 29 29 1-4 Years Post 20 31 20 30 16 31 4 29 60 Secondary Vocational or Technical 12 17 12 18 10 19 2 .14 36 High School or Less 24 33 27 40 17 33 . '" 4 29 72 Total 64 100 67 100 52 100 14 100 197 Occupation of Household Head Professional or Managerial' 26 39 21 30 22 41 9 64 78 Semi-Skilled 24 36 20 29 11 21 36 60 Unskilled 6 9 3 5 2 4 0 0 11 Retired 4 7 21 • 30 17 32 0 0 42 Other 6 9 4 6 1 2 0 0 11 Total 66 100 69 53 100 14 100 202 Total Family Income 0 - $8,000 2 3 15- 21 7 13 0 0 24 $8,001-$16,000 31 48 27 39 17 33 2 14 77 $16,001-$24 ,000 20 31 15 21 14 27 5 36 54 Over $24,000 12 18 13 19 14 27 7 50 46 Total 65 100 70 100 52 100 14 100 201 . 86. 4.4 (e) Education and Occupation The largest groups by educational level were those with high school or less (36.5%) and those with one to four years of university education (30.5%). The majority of those with high school or less were in the over 49 age group which reflects the lesser emphasis on formal post secondary education in the past. Those with some university education represented approxi mately 30% of the respondents under 30, 30-39, and over 49 years old. The 4 0-49 age group had the lowest proportion in this category with 17%. 8 The occupations of the household heads correspond to the educational levels discussed above. The largest single group were classified as professional or managerial with 38.6%. Exclud ing those that had retired, the professional/managerial groups represented 40% of those under 30 and betv/een 40 and 49 years old, 50% of those between 30 and 39, and 59% of those over 49. These 9 findings correspond with previous studies, particularly Eger where he noted the largest proportion of professionals in the oldest age group. The second largest occupation class was the skilled and semi-skilled representing 30% of the respondents. They were evenly distributed across the age groups if those retired are excluded. Naturally those who were retired were exclusive to the over 4 9 age group. 4.4 (f) Income Groups The questionnaire asked the respondents to classify their total gross family income into one of four categories, under 87. DISTRIBUTION OF NUMBER OF CHILDREN IN HOUSEHOLDS 1 i I TABLE 2 2 Comparative Age Distributions Roberts 1973 Survey 1977 No. % No. % Under 30 125 36.7 45 22.3 30-39 107 31.4 52 25.7 40 - 49 48 14.1 19 9.4 Over 49 61 17.9 86 , 42.6 Average 36 .55 45 .32 89. $8,000; $8,000-$16,000; $16 ,001-$24,000; and over $24 ,000. The groups were purposely made broad as it was felt narrower classifi cations may cause some to be reluctant to respond. In total the responses were evenly divided between those having over $16,000 income and those below $16,000. Fifty percent of those with over $16,000 income also had over $24,000. Given the average family income in B.C. at the time of the survey was approximately $18,000 per year"*"^, it is concluded that condominiums appeal largely to the moderate to average income groups as was noted in the previous ., 11 study. Table 23 compares the distribution of family incomes for the Hamilton and Roberts study, this study, and the corresponding income distributions for the population as a whole in each year. Several points should be noted. First, there is a considerably greater proportion of households in the lower income groups in the Hamilton and Roberts study (81.4% under $15,000) than is evidenced here (50.2% under $16,000). This is due in part to the general increase in incomes over the period (increasing from an average of $11,225 in 1973 to-$16,915 in 1976). Secondly, the. increase in condominium prices since 1973 necessitates that the purchasers have a larger income to support a mortgage of a simi-12 lar loan-to-value ratio. The second point of interest in the comparisons is that both surveys show larger proportions of household incomes in the $8,000 to $16,000 income bracket than does the general public. This confirms the earlier conclusion (above) that condominiums appeal to moderate income groups. Lastly, this study reveals a larger proportion of condominium purchasers in the highest income TABLE 23 COMPARATIVE TOTAL FAMILY INCOMES 90. Hamilton & Roberts Survey British Columbia 19731 Survey 1977 British Columbia 19762 Income Group % Income - Group % Income Group % 0-$8,000 8,001-15,000 15,001-20,000 Over 20,000 19.3 62.1 12.0 6.6 38.7 35.2 15.1 11.1 0-$8,000 8,000-16,000 16,001-24,000 Over 24,000 11.9 38.3 26.9 22.9 -$7,999 8,000-14,999 15,000-24,999 Over 25,000 28.9 21.9 29.2 19.9 Average Income 11,225 16,915 SOURCE 1: Statistics Canada, Income Distributions By Size In Canada, Catalogue 13-206, 1973 SOURCE 2: Ibid, 1976 : CMHC CMHC 19763 Survey 1977 Survey Disbribution Vancouver and Victoria Distribution No. % ' No. No. Under $10,000 11 1.9 24 11.9 $8,000 10,000-17,500 195 33.0 77 38.3 8,001-16,000 17,501-25,000 241 40.8 54 26.9 16,001-24,000 Over 25,000 144 24.4- 46 22.9 Over 24,000 SOURCE 3: Canadian Housing Statistics, 1977, Central Mortgage and Housing Corporation, Ottawa, P. 82. group (22.9%) than the general public (19.9%) which is also significantly greater than that evidenced by Hamilton and Roberts (6.6%). The significant upward shift in the proportion of this income group reflects the broadening of the condominium market. The second portion of Table 2 3 compares the CMHC data for new condominium purchasers, which is collected from the loan application forms, and the survey data. There is a much larger portion of purchasers in the sample in the lowest income group than in the CMHC data. This may be explained in part by the inclusion of those purchasers on pensions who paid all cash for their unit and appeared in the survey but which would not appear in the CMHC loan application files. The second interesting feature is that the largest proportion of households (40.8%) in the CMHC data are in the second highest income bracket ($17,501 to $25,000) while the largest proportion in the survey (38%) are in the second lowest bracket ($8,000 to $16,000). Removing the lowest income group from the analysis does not change the relative distributions. Part of this is due to the differences in the date of sale of the purchases, the CMHC data refers only to condominiums sold in 1976. Secondly, Hamilton and Roberts noted a similar pattern and hypothesized that people may have exaggerated their incomes on the loan appli cation in order to qualify. The distribution was thereby shifted upwards which may have also occurred here. Neither the differences noted between the income distributions of the previous study or the 1976 CMHC data contradicts the conclu sion that condominiums primarily appeal to moderate to average income purchasers. However, the recent rise in prices of the condominium units may have eliminated some of the lower income groups which appeared in the previous study. It should also be noted that a segment of the condominium market has been directed 13 at the wealthy and has met with some success in Vancouver Examining the distribution of incomes by age group (Table 20) reveals a shifting downward in the proportion of upper income purchasers as you move from the youngest group to the oldest. This is surprising given the fairly even distribution of occupa tions noted earlier and in the fact the young group is not likely to have reached their full earning potential yet. The distribution is explained by the number of retired purchasers in the oldest group, shifting their income distribution downward and, as revealed in the next section, the number of working wives is greatest in the younger groups, thereby providing two salaries and shifting their income distribution upwards. 4.4 (g) Two Wage Earner Households Table 24 displays the distribution of working spouses. The first point of interest is that the proportion of working spouses in this study (41.2%) is virtually identical to that found by Hamilton and Roberts (40.2%). Secondly, comparing the proportion that worked full or part time at the time of purchase and at the time of the survey reveals a slight drop (47.3% to 41.2%), the majority of the change occurring in the townhouse residents. This is to be expected as this group is the most likely to be entering into or are in the child rearing stage which would necessitate one spouse leaving the work force. TABLE 24 '.: DISTRIBUTION OF WORKING SPOUSES (AT TIME OF PURCHASE).' Working Full Time Working Part Time Not Working No. % No. No. % Wife's Age Under 30 35 67.3 3 5.8 14 26.9 30-39 12 57.1 2 9.5 7 33.3 40-49 1 16.7 1 16.7 4 66.7 Over 49 6 11.5 2 3.8 44 84.6 Total 54 41.2 8 6.1 69 52.7 Husband's Age Under 30 22 64.7 2 • 5.9 10 29.4 30 - 39 22 68.8 3 9.4 7 21.9 40-49 4 57.1 0 0.0 3 42.9 Over 49 6 10.3 3 5.2 49 84.5 Household Income Under $8,000 1 20.0 0 0.0 4 80.0 $8,000-$16,000 15 29.4 6 11.8 30 38.8 $16,000-$24,000 18 45.0 2 5.0 20 50.0 Over $24,000 20 58.8 0 0.0 14 41.2 Number of Dependent Children 0 39 45.9 • 5 5.9 41 48.2 1 9 47.4 1 5.3 9 47.4 2 6 25.0 ' 1 4.2 17 70.8 3 0 0.0 1 50.0 1 50.0 4 0 0.0 0 0.0 1 ,\ 100.0 94. TABLE 24(Contd.) ..; Working Working Not Full Time Part Time Working No. % No. % No. % Structure Type (a) At Time of Purchase Townhouse 21 40.4 5 9.6 26 50.0 Low-Rise 19 51.4 3 8.1 15 40.5 High-Rise 9 28.1 0 0.0 23 71.9 Mixed 5 50.0 0 0.0 5 50.0 (b) At Time of Survey Townhouse 16 30.8 4 7.7 32 61.5 Low-Rise 18 47.4 2 5.3 : 18 47.4 High-Rise 10 31.2 0 0.0 22 68.8 Mixed 4 44.4 0 0.0 5 55.6 The most noticeable distinction between those households with a spouse working or not working is displayed in the distri bution by age. The majority (71%) of the spouses below 40 years old are working full or part time while only a very small percen tage over 40 are employed. The distribution is much more, even when the family income is examined with only a slightly higher proportion of working spouses in the upper income groups. The results of the cross-tabulation by age are confirmed by Hamilton and Roberts. However, they found more pronounced trends over the income' groups and by the number of children1^. They found that the number of non-working spouses v/as greatest in the lower income groups and in families that had dependent children. 4.4 (h) Structure Type The, structure types- are classified, as. townhouse, low-rise apartment or high-rise apartment. Townhouses are thought to be the most suitable style for families with children as the units are larger and have greater surrounding open areas and amenities than do apartments. In contrast, apartments are thought to be more suited to singles or couples without children and are generally designed with this in mind. These characteristics of the structure types are reflected in the profiles of the respec tive purchasers. In support of this perception, it is noted that those in the 30-39 year old group, which had the highest average number of children, are found primarily in townhouses (Table 21). The majority of the oldest group can be classified as "empty-nesters" indicating their families have grown up and left; they are correspondingly located in apartments. The distribution by occupation, education, income, and the incident of working spouses across structure types is commensurate with the findings to date and need not be elaborated on. 4.4 (i) Previous Tenure Knowledge of the previous tenancy of condominium owners is important both for the directing of marketing and advertising and to provide further information on their profiles. The majority of owners (62.4%) had rented prior to the purchase of their unit; of these 72% had lived in low-rise (45.6%) or high-rise (26.4%) apartments. Of those that had owned previously, 73.3% had a single family detached house and 18.7% had condominiums. While the number of previous condominium owners is not large, they do reflect a mobility between units and a level of satisfaction with the concept, sufficient, for the people to repurchase. Tables 25, 26, 27, and 28 display the previous tenure classifi cation by present structure type, age group, price of the condo minium unit, and the loan-to-value ratio respectively. The data combines to show that the majority of renters are young, most frequently had high loan-to-value ratios and purchased lower than average priced townhouse and low-rise apartment units. Conversely, previous owners were older, had larger down payments, and purchased the more expensive apartment units. The previous tenure type cross-tabulated with the reasons given for moving are presented in Table 29; the results are as anticipated given the above findings. By far the most frequently mentioned reason given by previous renters was to establish an TABLE 25 97. Distribution of Previous Tenure Type by Present Structural Type Tenure Type Owned Rented Other Total Present Structural Type No. % No. % No. % No. % Townhouse 17 25.8 49 74.2 0 0.0 66 100.0 Low-Rise 23 32.9 45 64.3 2 2.9 70 100.0 High-Rise 28 53.9 22 42.3 2 3.8 52 100.0 Mixed 4 28.6 10 71.4 0 0.0 14 100.0 Total 72 35.6 126 62.4 4 2.0 202 100.0 TABLE -26 ... DISTRIBUTION OF PREVIOUS TENURE TYPE BY AGE GROUP Tenure Type Owned Rented Other Age Group No. % No. % No. % Under 30 5 6.9 36 28.8 4 80.0 30 - 39 8 11.1 42 33.6 1 20.0 40-49 2 2.8 17 13.6 0 0.0 Over 49 57 79.2 30 24.0 0 0.0 Total 72 100.0 125 100.0 5 100.0 DISTRIBUTION OF PREVIOUS TENURE UNDER 50 YEARSOLD 50 YEARS OLD OR GREATER 100. TABLE 27 DISTRIBUTION OF PREVIOUS TENURE TYPE BY PRICE OF UNIT Previous Tenure Type Owned Rented Other No. % No. % No. % Under Average Price (By Year and Structure Type) 24 37.5 70 58.8 3 75 Over Average Price (By Year and Structure Type) 40 62.5 49 41.2 1 25 Total 64 100.0 119 100.0 4 100.0 101. TABLE 28 DISTRIBUTION OF PREVIOUS TENURE BY LOAN-TO-VALUE RATIO Previous Tenure Owned Rented Other % % % Over 95% 0 9 0 80-95 9 47 25 70-79 6 16 25 50-69 11 12 25 25-49 6 3 25 Under 25 68 12 0 102. equity followed distantly by those desiring more space. The demand for home ownership was the major motivation for their move. It is likely the lack of a sizeable down payment may have been a restricting factor in their purchase decision given the higher incomes of the young (predominantly renters) combined with their high loan-to-value ratios. Some developers have observed this factor and have used it to market the units by offering appealing! low down payments^. The reasons for moving expressed by the previous owners were dominated by those wanting less space and less upkeep. The single family house, of which the majority had owned, was probably becoming burdensome and no longer necessary as the owners' require ments changed. The low loan-to-value ratios indicates they are using the equity from their house to purchase the units. Further, the tendency for this group to buy the more expensive units com bined with their substantial equity shows they are looking for more amenities and have the money to act on their wishes. Design ing of projects specifically for this group to include features they would demand would likely meet with success even if they had to be marketed at higher than average prices. The reasons for moving are displayed by age group and by present structure type in Tables 30 and 31. The results confirm those found when the previous tenure type was cross-tabulated with the reasons given for moving. The younger owners wanted to establish an equity while those over 49 years old wanted less space and upkeep. 103. One of the interesting outcomes of this survey was the number of older people desiring a less expensive unit. It was expected that the older home owners would have traded down from their home in order to free some of their capital to provide an additional income stream or for current consumption. The low response to this question and the substantial down payments dis played earlier indicate the freedom from mortgage payments is more highly valued. 4.4 (j) Loan-To-Value Ratios and Total Monthly Payments Tables 32 to 34 contain the distributions of loan-to-value ratios and total monthly payments. Their results confirm the findings discussed above. The over 49 age group, which were largely previous owners of single family dwellings purchased their unit with large down payments and hence have low loan-to-value ratios and monthly payments. The younger age groups, that were predominantly renters previously, had higher loan-to-value ratios and correspondingly higher monthly payments. 4.4 (k) Future Intentions The questionnaire asked the respondents if they intended to stay in their present unit for the foreseeable future. Those that were intending to move were asked to state the type of tenure and structure they intended to move to and that which they would most prefer. There was very little difference between that which they preferred and that which they were expecting to move to and therefore the preferred distribution is not presented. There was a problem encountered as some people stated they did 104. TABLE 29 REASON FOR MOVING BY PREVIOUS TENURE TYPE -FIRST REASON ONLY Previous Tenure Type Owned Ren ted other Reason No. % No. % No. % Change in household membership 16 23 .4 11 9. 0 2 40. 0 Desired less space 10 14 .7 4 3. 3 0 0. 0 Desired less upkeep 25 36 .8 3 2. 5 0 0. 0 Desired more living space 3 4 .4 17 13. 9 0 0. 0 Desired better neighbourhood conditions 1 1 .5 1 0. 8 0 0. 0 Desired less expensive unit 1 1 .5 5 4. 1 o 0. 0 To establish an equity 1 1 .5 56 45. 9 2 40. 0 Closer to transportation, job, etc. 4 .5 .9 2 1. 6 1 20. 0 Job transfer or change 2 2 .9 12 9. 8 0 0. 0 Other 5 7 .4 11 9. 0 1 o 0. 0 105. TABLE 30 REASON FOR MOVING BY AGE GROUP -TOTAL NUMBER OF REASONS Age Group Under 30 30-39 40-49 Over 49 Total NO No % No. % No. % Reason Change in Household Membership 7 8.3 10 10.3 5 17.2 18 12.2 40 11.2 Desired less space 1 1.2 3 3.1 1 3-4 21 14.2 26 7.3 Desired less upkeep 3 3.6 ' 2 2.1 2 6.9 49 33.1 56 37.8 Desired more living space 20 23.8 16 16.5 6 20.7 7 4.7 49 33.1 Desired better neigh bourhood conditions 4 4.8 8 8.2 0 0.0 4 2.7 16 4.5 Desired less expen sive unit 1 1.2 4 4.1 0 0.0 9 6.1 14 3.S To establish an equity 35 41.7 26 26.8 11 37.9 17 11.5 89 24.9 Closer to transporta tion, job, etc. 3 3.6 9 9.3 1 3.4 6 4.1 19 5.3 Job transfer or change 2 2.4 9 9.3 1 3.4 8 5.4 20 5.6 Other 8 9.5 10 10.3' 2 6.9 9 6.1 29 8.1 Total 84 100.0 97 100.0 29 100.0 ] L48 100.1 358 100.C 106. TABLE 31 < Reasons for Moving by Structure Type -Total Responses Structure Type Townhouse Low-Rise High-Rise Mixed Reason Change in household membership Desired less space Desired less upkeep Desired more living space Desired better neighbourhood conditions Desired less expensive unit To establish an equity Closer to transportation, job, etc. Job transfer or change Other Total No. % No. % No. % No. % 16 13.6 6 5.1 11 9.3 22 18.6' 7 5.9 2 1.7 31 26.3 4 3.4 8 6.8 11 9.3 14 11.2 11 8.8 18 14.4 14 11.2 5 4.0 7 5.6 34 27.2 6 4,8 6. 4.8 10 8.0 10 14.9 9 13.4 24 35.8 6 9.0 4 6.0 5 7.5 16 23.9 7 10.5 5 7.5 3 4.5 0 0.0 0 0.0 3 11.5 7 10.5 0 0.0 0 0.0 8 30.8 2 7.7 1 3. 5 -..,19'=-. 118 100.0 125 100.0 67 100.0 26 100. 107. not intend to move indicated where they would move to. As the intention of the question was to identify the occupants' desires these responses were included. Table 35 displays the future intentions by age group and structure type. Overall the majority (63.7%) plan to stay while only 36.3% plan to move. As would be expected higher proportions (53.3% of those under 40 years old) of those in the younger groups plan to move while the majority (74.6% of those over 39 years old) of the older groups plan to stay. Of those planning to move, the overwhelming majority (77.4%) intend to own a single family home (Table 36). Only 13% of the respondents expressed an interest in renting. It is quite evident by these results that many of the younger households view condominiums only as temporary accommoda tion before moving to a single family unit. 4.4 (1) Summary Profile The analysis of the data by age group and structure type indicate there are three submarkets represented by the condominium purchasers:-(a) young (below 40 years old) apartment condominium dwellers, generally without children, having above average family incomes as a result of both adults (where applicable) working. They purchased a condominium primarily to establish an equity and will likely attempt to move to a single detached dwelling as their incomes and family size increases. (b) townhouse dwellers are predominantly 30 to 39 years-old and have the highest average number of children. Approximately half of these respondents intend to move to a single detached dwelling in the future, 108. TABLE 32 DISTRIBUTION OF LOAN-TO-VALUE RATIO BY AGE GROUP Age Group Under 30 30-39 40-49 Over 49 1st Mtge 1st & 2nd Mtge 1st Mtge 1st & 2nd Mtge 1st Mtge 1st & 2nd Mtge Lst Mtge lst & 2nd Mtge % % % % % % % % Over 95% 2.3 7.0 4.1 8.2 10.5 21.1 0.0 0.0 80 - 95 44.2 58.1 44.2 51.0 15.8 31.6 2.6 11.1 70 - 79 18.6 9.3 32.6 18.4 36.8 36.8 9.2 5.6 50 - 69. 16.3 9.3 . 20.9 12.2 26.3 5.2 15.3 15.3 25-49 7.0 4.7 0.0 0.0 10.5 5.2 12.5 8.3 Under 25 11.6 11.6 10.2 10.2 0.0 0.0 65.3 65.3 Average 44.45 46.36 50.84 55.35 60.86 66.76 43.06 47.58 109. TABLE 33 DISTRIBUTION OF LOAN-TO-VALUE BY STRUCTURE TYPE Structure Type Townhouse 1st Mtge. 1st & 2nd Mtge. Lowrise 1st Mtge. 1st & 2nd Mtge. Highrise 1st Mtge. 1st & 2nd Mtge. Loan-to-Value % % % % % % Over 95% 3.2 12.9 0 0 6.0 6.0 80 - 95 40.3 40.3 11.3 32.3 12.0 22.0 70 - 79 12.7 16.1 24.2 12.9 16.0 8.0 50 - 69 19.4 12.9 16.1 11.3 10.0 10.0 25 - 49 6.5 4.8 9.7 4.8 8.0 6.0 Under 25 12.9 12.9 38.7 38.7 48.0 48.0 Average 65.9 71.4 42.1 47.0 37.7 40.5 110. TABLE 34 DISTRIBUTION OF TOTAL MONTHLY PAYMENTS BY' AGE GROUP Monthly AGE GROUP Payment Under 30 30 - 39 40 - 49 Over 4 9 No. % No. % No. % No. % 0-$100 1 2.3 3 5.9 0 0.0 21 28.4 101-200 1 2.3 1 2.0 1 5.3 29 39.2 201-250 0 0.0 4 7.8 3 15.8 5 6.8 251-300 3 6.8 8 15.7 1 5.3 7 9.5 301-350 6 13.6 6 11.7 5 26.3 3 4.1 351-400 9 20.5 11 21.6 3 15.8 1 1.4 401-500 9 20.5 8 15.7 5 26.3 5 6.8 501-700 15 34.1 8 15.7 0 0.0 1 1.4 Over 700 0 0.0 2 3.9 1 5.3 2 2.7 TABLE 35 Future Housing Intentions 111. Plan to Stay Plan to Move Total No. .% No. % . No. % Age Group Under 30 19 43.2 25 56.8 44 100.0 30 - 39 23 44.2 29 55.8 52 100.0 .40-49 12 63.2 7 36.8 19 100.0 Over 49 74 86.1 12 13.9 86 100.0 Total. 128 63.7 73 36.3 201 100.0 Structure Type Townhouse 33 50.0 33 50.0 66 100.0 Low-Rise 47 68.1 22 31.9 69 100.0 High-Rise 40 76.9 12 23.1 52 100.0 Mixed 8 57.1 6 42.9 I4 100.0 Total 128 63.7 73 36.3 201 100.0 TABLE 36 Choice of Next Structural Type by Age Group - For Those Who Intend to Move Age Group Under 30 30 -• 39 : 4 0 - 49 Over 49 Total No. a o No. p. No. % No. % No. % Next Structural Type Owned Single Family 24 77.4 28 82.4 6 75.0 7 50.0 65 74.7 Duplex 1 3.2 2 5.9 1 12.5 0 0.0 4 4.6 Townhouse 4 12.9 2 5.9 0 0.0 3 21.4 9 10.3 Apartment 2 6.5 2 5.9 1 12.7 2 14.3 7 8.1 Mobile Home 0 0.0 0 0.0 0 0.0 2 14.3 2 2.3 Total 31 100.0 34 100.0 8 100.0 14 100.0 87 100.0 Rental Single Family 2 50.0 0 0.0 0 . 0.0 2 28.6 4 . 30.8 Duplex 1 25.0 0 0.0 0 o.o 0 0.0 1 7.7 Townhouse 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 Apartment 1 25.0 1 100.0 1 100.0 5 71.4 8 61.5 Mobile Home • 0 0.0 . 0 0.0 0 0.0 0 0.0 0 • 0.0 Total 4 100.0 1 100.0 1 100.0 7 100.0 13 100.0 Total Intending to move 35 ; 35 9 21 1 00 Percentage of total age group 77.8% 67.3% 47.4% 24.7% 49.8% 113 . (c) the older (over 40 years old), empty nest group that purchased primarily apartments. They are moving from their single family houses to escape the required up keep and are using the equity from their prior resi dence to make substantial down payments. The major ity of this group do not intend to move from their present accommodation. 4.5 Discriminant Analysis In the previous section a multitude of demographic, economic and motivational factors were examined by the condominium structure type and the owners' age groups. The analysis revealed three sub-markets within the condominium market, young apartment purchasers, old apartment purchasers, and townhouse purchasers. Further analysis was then used to verify that these groups did exist and to identify the significant variables. Discriminant analysis was used for this purpose. It is a mathematical technique that, identifies the variables which, discri minate between two or more groups by capitalizing on the differ ences in the respective characteristics. Once a set of discrimina tor variables is found for a known classification group they can be used to predict the classification of an unknown group. Simply, the sample is initially classified into known groups, say townhouse purchasers and apartment purchasers. The character istics of each set of purchasers are then examined to find those characteristics that are most different between the groups, say the number of children and household incomes are found to be significant discriminators. It can then be said the major differ ences between the two populations are the differences in the respective number of children and incomes. Further, having 114 . identified the discriminating variables, the likely purchase decision of another group of people can be predicted. Conversely, if a townhouse development is built, the type of purchasers can be predicted and hence the design and marketing of the project directed to the people with the corresponding characteristics. Discriminant analysis is a special type of factor analysis that separates two or more groups by forming one or more linear combinations of the variables each with a score of the discrimin ant functions. "The maxiumum possible number of functions which can be derived is one less than the number of groups, if there are more variables than groups. In the case of having more groups than variables, then the number of discriminating functions 17 can be equal to the discriminating variables." If the scores within each group are quite similar while the scores between groups differ, identification of the groups can occur. The analysis takes place in a step-wise procedure selecting the best discriminating factor then the second best and so on until none of the remaining variables discriminate beyond the stated confidence interval. The three groups were initially separated by age and/or present structure type as reported in the questionnaire. The young apartment group was defined as those who had the head of the household below 40 years old and had purchased an apartment unit. The old apartment group consisted of those over 39 that had an apartment unit while the townhouse group were all townhouse purchases regardless of age. The responses from those in mixed , apartment and townhouse developments were not used as they would 115. interfere with the treatment of the other groups and were too 18 few to be analyzed alone. There were 13 variables used which are displayed in Table 37 along with their respective means and standard deviation by group. In analyzing the three groups together, four significant variables (at the 95% confidence interval) were identified: the use of second mortgages; the percentage of working spouses; the age of the household head; and the number of children. Townhouse purchasers had the highest incidence of usage of sec ond mortgages with 52% in comparison to the young apartment group (38%) and the old apartment group (22%). Similarly, they had the highest percentage of working spouses (79% versus 65% for the young apartment group and 55% for the old apartment group) and the largest average number of children (.919 versus .231 and .284 for young and old apartment purchasers respectively). The young apartment group had the youngest average age of the house hold heads (29.3 years old) followed by the townhouse purchasers (39.5 years old) and the old apartment group (59.6 years old). The program then predicted the classification of the purch asers using these variables as discriminators. The predicted versus observed results are displayed in Table 38, 73.4% of all the cases could be correctly classified. While the model per formed reasonably well in classifying the young and the old apartment groups, 82.7% and 85.1% respectively, the results were much poorer for the townhouses (51.6% correctly classified). Referring again to Table 37, there is evidenced a problem since the mean of several of the variables are similar between the young apartment and townhouse groups though different from the old apartment group. The notable variables being the loan-to-value TABLE 37 116 . Profile of Condominium Purchasers Discriminate Analysis Variables* Young Apartment Townhouse Old Apartment Mean St. Dev. Mean St. Dev. Mean St. Dev. Financial Variables Unit Purchase Price ($) 40908 11224 42933 16762 46315 20734 Gross Family Income 2.904 0.955 2.613 0.894 2.432 1.021 Loan/Value Ratio (%) 68.5 33.0 71.0 31.4 31.5 36.4 Monthly Payment ($) 382.58 143.67 345.50 153.56 197.14 163.30 Use of 2nd Mtge. (%) 38.5 49.1 51.6 : 50.4 21.6 41.4 Pre-Ownership (%) 17.3 38.2 22.6 42.2 56.8 49.9 Demographic Variables Age of Household Head 29.3 4.9 39.5 12.9 59.6 12.3 Occupation 2.346 0.764 2.129 0.914 1.784 0.955 Education 2.558 1.127 2.742 1.187 2.743 1.250 Married (%) 65.4 48.0 83.9 37.1 66.2 47.6 No. of Children 0.231 0.509 .919 0.997 .284 0.652 Working Wife (%) 65.4 48.0 79.0 ; 41.0 55.4 50.0 Reason for Moving 0.327 0.550 0.258 0.571 -0.122 0.548 117. ratio, monthly payments, percentage of pre-ownership and the reason for moving. Such similarity excludes the variables from the equation and hence reduces the predictive capability of the technique. Tb adjust for this problem the analysis was repeated using only two groups at one time. A summary of the results is present ed in Exhibit 1. In all cases the method was able to classify approximately 80% of the respondents correctly. The discrimina ting variables between the townhouse group and each apartment group were the age of the household head and the number of children. Townhouses had the greatest number of children per unit (0.919 versus 0.231 for the young apartment group and 0.284 for the old apartment group) (Table 4.21) and they had a medium age of the household heads (39.5 years old versus 29.3 for young apartments and 59.6 for old apartments). The comparison of the young and old apartment groups was performed excluding the age of the household head as this was the primary means of initial classification. The significant discrimin ating variables that were identified were income, monthly payment, unit value, and the reason for moving. The young apartment group had higher average incomes, larger monthly payments but purchased less expensive units than the older group. This reflects the use of the equity of their prior home by the older group as discussed previously. The older people moved because they desired less space and upkeep (hence the minus sign, -0.122) while the young group was looking for more space (hence the positive sign, 0.327). TABLE 38 '' ' ' 'r ll8 Number of Cases Classified into Each Group Predicted Young Apartment Townhouse Old Apartment Total Observed No. % No. % No. % No. % Young Apartment 43 82.7 9.'. 17.3 • °; 0 52 100.0 Townhouse 17 27.4 32 51.6 13 21.0 62 100.0 Old Apartment 4 5.4 7 9.5 63 85.1 74 100.0 EXHIBIT 1 Results of Discriminant Analysis Classifications % Correctly Classified 77.19% Predicted vs. Observed Predicted Observed Ynqaot. Twnhsp. Yngapt. 82.69 17.31 Twnhse. 27.42 72.58 Significant Variables - Use of 2nd Mtge. - Age of Hsehold head - Number of Children Young Apartment vs. Townhouse Old Apartment vs. Townhouse 85.29% Predicted Observed Oldapt. TwnhsR. Oldapt. 90.54 9.46 Twnhse. 20.97 79.03 - Percentage of working wives - Aye of household head - Number of Children Young Apartment vs. Old Apartment (Excluding Age of Household Head) 78.57% Predicted Observed Ynqaot. OldApf-.. Yngapt. 84.62 15.38 Oldapt. 25.68 74.32 - Family income - Total Monthly payment - Unit value - Reason for Moving -120. 4.6 Conclusion The evidence presented here supports the conclusion that three submarkets do exist within the condominium market: young apartment dwellers; townhouse dwellers; and older apartment dwellers. The differentiation of the townhouse market from that of apartments is dependent mainly on the age of the household head and the number of children. The average age of the townhouse purchaser was midway between the average ages of the young and old apartment purchasers. Townhouse purchasers had a higher average number of children than either apartment group. Excluding the age variable, the apartment groups are differentiated primarily by their financial situation and their motivations. The younger group had higher average incomes but lower down payments than the. older, group.. The younger group also wanted more space while the older group wanted less space and upkeep. These conclusions confirm not only the existence of the three sub-markets but also the characteristics of the purchasers indicated earlier. 4.7 Motivation For Purchasing a Condominium The previous section examined the motivations of purchasers briefly in compiling their profiles. It was found the younger residents bought most of the townhouses and a portion of the apartments with the desire to establish an equity. The older groups purchased predominately apartments because they wanted to reduce their upkeep and space. This section will examine the factors of the purchase decisions in greater detail. 121. 4.8 Condominium Versus Single Detached House It was expected the apartment dwellers being predominantly childless and concerned with less space and upkeep would not have looked for a house prior to purchasing their condominium. Convers ly, townhouse residents, being largely families with children or i the child bearing age group, would consider a single detached house and therefore would be expected to shop for one prior to purchasing their unit. These expectations were largely confirmed by an analysis of cross-tabulations presented in Table 39 as only one-quarter of all apartment owners and one-half of all townhouse owners looked for a house prior to buying a condominium. Table 40 presents the distribution of those who did and did not consider a house first cross-tabulated by the tenure and structure type of the owner's prior accommodation. The frequen cies displayed in this table are very close to those found by 19 Hamxlton and Roberts . Of those which had owned previously, 78.6% did not look for a single family house prior to purchasing their unit. This was expected as the majority already owned single family houses. Interestingly, only 8% of prior condominium owners looked for a house indicating a level of satisfaction with the concept and a mobility between units. Fifty-eight percent of the former renters did not consider a house first; there was no discernable pattern displayed by the rental structure types. The reasons given in previous studies for purchasing a condominium unit rather than a single detached house have been overwhelmingly the price or economic advantage and the freedom TABLE 39 122. Those Who Considered Single Detached House Prior.to Purchase of a Condominium — by Present Structure Type Present Structure Looked for I No. louse First % Did Not House No. Look for First % Townhouse Apartment 34 29 52 24 31 93 48 76 Total 69 34 132 66 123. 20 from maintenance and upkeep . Locational factors and the provision of recreational facilities are also mentioned but are much less important. An identical pattern was found in this study. The respondents were allowed to indicate up to three reasons for their purchase of a condominium over a house; the frequencies of the total number of times each reason was mentioned is dis played in Table 41. The price or economic advantage was segmented into three components: a lower price for an equal or better unit (20.3%); lower monthly payments (15.6%); and lower down payment (10.0%). Combined they represent 45.9% of the total responses making price the most important factor. This was followed by the freedom of upkeep with 2 8% of the total. The reasons of location and the provision of recreational facilities were much, less signi ficant being 13.4% and 7.7% of the total choices respectively. Examining the data by structure type reveals that freedom from upkeep is more important to apartment purchasers than town-house purchasers as expected. High-rise residents showed a greater preference for the location factor and less for the financial ones than did the other structure types. Again this is expected as high-rise buildings tend to be built closer to the central areas, therefore having significant locational advantages and they also tend to be more expensive, thereby attracting wealthier people who are less concerned with price. 4.9 Important Features of the Unit Purchase The features of the unit purchased were examined on the basis of three categories; locational factors, features within the unit, and features of the project (i.e., common facilities and areas). TABLE 40 Those Who Considered Single Detached House Prior to Purchase of a Condominium - by Previous Structure Type Former Owners Previous Structure Looked for House First Did Not Hous Look for e First No. % No. % Single Detached 13 25 39 75 Semi-Detached 1 33 2 66 Townhouse 1 12.5 7 87.5 Low-Rise 0 0 2 100 High-Rise 0 0 2 100 Mobile Home 0 0 3 100 Total Owners 15 21.4 55 78.6 Former Renters -Previous Structure Single Detached 7 39 11 61 Semi-Detached 8 53 7 47 Townhouse 0 0 0 0 Low-Rise 21 \ 39 33 61 High-Rise 14 42 19 58 Mobile Home 0 0 0 0 Total Renters 50 42 70 58 Total Owners and Renters 65 34 i 125 66 TA3LE 41 Reason for Purchasing a Condominium over a Single Detached House - by Structure Type (Total Reasons) Townhouse Low-•Rise High -Rise Total No. % No. % No. % No. % Better Location 19 10.8 19 11.6 24 18.6 68 13 .4 Lower Full Price for Equal or Better Unit 45 25.6 34 20.7 16 12.4 103 20 .3 Lower Downpayment 22 12.5 15 9.1 10 7.3 51 10 .0 Lower Monthly Payments 23 13.1 34 20.7 .18 14.0 79 15 .6 Freedom of Exterior Upkeep 41 23.3 50 30.5 42 32.6 142 28 .0 Recreational Facilities 17 9.7 5 3.0 10 7.6 39 7 .7 Other 9 5.1 7 4.3 9 26 5 .1 126. REASON FOR PURCHASING A CONDOMINIUM RATHER THAN A SINGLE DETACHED HOUSE Classifying the features in this manner and providing details within each category should provide developers with greater infor mation on what consumers desire. Asking the respondents to identify the important feature in the unit will not provide a complete picture, however, as they may desire others that were not available in the unit. To correct this, data were also collected on the features the residents would have liked and would be willing to pay more for but were not provided in their unit. The results of this section are examined only on the basis of their structural type. Analyzing by structure type allows the comparisons with previous studies to be made. The important locational features are displayed in Table 42. In total, the distribution is very uniform covering a wide range of the traditionally important features. Proximity to work, shopping, parkland, downtown, quiet neighbourhoods, and well maintained neighbourhoods all accounted for approximately 10% of the total responses. Similar results were obtained using only the first choice selected. The proportion of respondents that indicated that location was not a factor in the selection of the unit was 12.4%. Some small differences in the frequency of the important features cited were displayed between the structure types although they were in the anticipated direction given the owners character istics. Townhouse residents cited the closeness to work, well maintained neighbourhood, and quiet neighbourhood as the most 128. important features reflecting their family orientation. They also had the largest percentage of respondents of any structure type that indicated that location was not a factor, 15.9%. The residents of low-rise units listed the closeness to shopping, bus routes, downtown, and a quiet neighbourhood while those in high-rises recorded the vicinity to parkland and shopping as the most frequently mentioned features. High-rise dwellers had the lowest proportion of respondents that felt location was not a factor in the selection of their unit. The most often mentioned important features within the unit were apparent good quality construction (22.0%), larger than average room size (17.8%), scenic view (13.1%), and a large patio or balcony (10.5%) (Table 43). Townhouse residents listed apparent good quality construction (19.9%) and larger than average room size (17.0%) most frequently, while the order was reversed in low-rise apartments being larger than average room size (21.2%), apparent good quality construction (19.6%), and quality appliances (12.8%). High-rise residents most frequently cited apparent good quality construction (28.4%), scenic view (19.9%), and larger than average room size (18.4%). Overall only 5.0% of all respondents indicated the features of the unit were not important in its selection, less than half those that similarly indicated the location factor. Fifty-eight percent of the respondents indicated they would have wanted some changes in their unit and they would have been willing to pay more for them. The most frequently mentioned 129 TABLE 42 Important Locational Features of the Unit by Structure Type (Total Choices): Townhouse Low-Rise High-Rise Total No. % No. % No.. % . No. % Close to Schools 11 6.7 0 0 2 1.5 15 3.0 Closeness to Work 29 17.7 17 10.0 16 11.9 70 13.8 Closeness to Shopping 15 9.1 27 15.9 18 13.4 62 12.2 Closeness to Bus Routes 4 2.4 25 14.7 16 11.9 45 8.9 Closeness to Downtown 9 5.5 22 12.9 15 11.2 51 10.1 Near Parkland or Recreational Facilities 16 9.8 15 8.8 24 17.9 62 12.2 Quiet Neighbourhood 23 14.0 21 12.4 9 . 6.7 57 11.2 Well Maintained 25 15.2 15 8.8 16 I1-9 60 11.8 Neighbourhood Dwellings Surrounding Residents of Similar Education 7 4.3 1 0.6 1 ' 0.7 10 2.0 Surrounding Residents of Similar Income Bracket 2 1.2 1 0.6 : 3 2.2 8 1.6 Close to Friends 8 4.9 12 7.1 7 5.2 28 5.5 Other 3 1.8 3 1.8 2 1.5 9 1.8 Location was not a Factor in Selecting this Project 12 7.3 11 6.5 5 3.7 30 5.9 TABLE 43 130. Important Features of the Unit by Structure Type (Total Choices) Townhouse Low- Rise High -Rise Total No. % No. o No. % . No. % Larger Than Average 29 17.0 38 21.2 26 18.4 95 17.8 Sized Rooms Existence of a 19 11.1 13 7.2 2 1.4 41 7.7 Fireplace Unique Design 15 8.8 4 2.2 1 0.7 25 4.7 Features Superior Appliances 13 7.6 23 12.8 8 5.7 49 9.2 Apparent Good 34 19.9 35 19.6 40 28.4 117 22.0 Quality Construction Greater than Average 11 6.4 18 10.1 10 7.1 42 7.9 Storage Space Large Patio or Balcony 18 10.5 19 10.6 17 12.1 56 10.5 Scenic View 16 9.4 20 11.2 28 19.9 70 13.1 Other 10 5.8 7 3.9 5 3.5 26 4.9 Features of the 6 3.8 2 1.1 4 2.8 12 2.3 Unit were not Important items were greater than average storage space, fireplace, larger than average sized rooms and large patio or balcony (Table 44). Several of these items were also mentioned as the most important reasons for the selection of the unit which implies that these are widely desired features but are presently found in only some projects. The distribution of the important features of the project are displayed in Table 45. Well maintained common areas, land scaping, and covered parking in total were the most frequently mentioned items. Apartment residents also cited these reasons most frequently, however, the order was changed to covered parking, well maintained common areas and landscaping. The townhouse respondents listed landscaping, adequate playground facilities for children, well maintained common areas and the existence of a swimming pool most frequently, again reflecting their family orientation. An important point should be noted from these results. The concern for the landscaping and maintenance of the common areas reveals the importance of the exterior appearance of the project to the residents. Therefore, one might expect that the sale price will be directly affected by the condition of these features. To enhance property values, the present owners might ensure these areas are properly maintained and developers should note their importance when designing the project. The desired changes in the project were indicated by 45% of the respondents and are displayed in Table 46. Considering all structure types, the most frequently mentioned items were TABLE 44 ' FREQUENCY OF DESIRED CHANGES IN THE UNIT BY STRUCTURE TYPE .' . • Desired Changes in the Unit Townhouse Low-Rise High-Rise Total % % % % Larger than Average Sized Rooms 16.7 9.1 18.8 14.7 Existence of a Fireplace 18.5 19.7 13.2 15.7 Unique Design Features 11.1 10.6 9.4 10.5 Superior Appliances 11.1 1.5 9.4 6.8 Apparent Good Quality Construction 7.4 4.5 5.7 6.8 Greater than Average Storage Space ; . 16.7 13.6 22.6 18.3 Large Patio or Balcony 11.1 15.2 11.3 13.1 Scenic View 5.6 16.6 3.8 8.4 Other 1.9 9.1 5.7 5.8 Total Respondents desiring changes in the Unit = 118 (58%) • •• TABLE 45 Important-Features of the Project by Structure TVHP (Total Choices) Towi ihou se Low-Ri se High-Ri se Total No. % Mo % No. 1 % No. % Well Landscaped Common Areas 33 21 .0 27 19 .1 23 19 .2 88 19 .5 Large Open Garden or 22 14 . 0 10 7 41 Wooded Area within the O 3 . 0 9 .1 Development Adequate Playground 15 19 .6 2 1 .4 0 0 20 4 .4 Facilities for Children Existence of a Swimming Pool 21 13 .4 5 3 .5 9 7 .5 39 8 .6 Existence of a Tennis Court 0 0 0 0 1 0 .8 1 0 .2 Existence of a Workshop 1 0. 6 5 3 .5 5 4. 2 11 2. 4 Well Maintained Common Areas 27 17. 30' 21. 5 26 21. 7 94 20. 8 Adequate Covered Parking 16 10. 2 35 24. 8 32 26. 7 85 18. 8 Adequate Visitor Parking 7 4. 5 4 2. 8 7 5. 8 . 18 4. o Other . 9 5. 7 10 7. 1 1 0. 8 23 5. 1 Features of the Project Were Not Important 6 3. 8 13 9. 2 10 8. 3 32 7. 1 134. recreational facilities such as swimming pool or tennis court, covered and visitor parking. The desire for more parking and 21 recreational facilities was also noted by Hamilton and Roberts 22 and Norcross . It would appear that developers should undertake some careful market analysis.on the demand for additional parking and amenities. Providing extra parking facilities may not be economically feasible in the higher density apartment areas as would the pro viding of large area recreational facilities like swimming pools and tennis courts. How much more people would be willing to pay for these items is unknown but it is unlikely it would cover the required costs. The same argument cannot be as strongly made for townhouse developments as they have larger open areas which could accommodate recreational facilities or extra parking. Again the trade-off between the extra cost and the extra selling price is unknown so a definitive statement cannot be made. The important features of the unit, both present and desired, have been revealed above. In planning a development, certain tradeoffs between the areas are necessary however. The respondents were therefore asked which was the single most important area of concern in the selection of their unit. The results are presented in Table 47. The reason most frequently cited was price, this was particu larly true for the respondents in the younger age groups and those buying the below average price units. Location was the next most important feature followed closely by the features of the unit and the features of the project. The older age group showed a greater TABLE 46 FREQUENCY OF DESIRED CHANGES IN THE PROJECT BY STRUCTURE TYPE.. Desired Changes in the Project Townhouse .Low-Rise High-Rise % Total % Well Landscaped Common Areas 4.-8 :f ••'.V'-i..'2.2-\.v'' 0.0 3.3 Large Open Garden or Wooded Areas Within the Development 6.3 13.0 " 7.4 9.2 Adequate Playground Facilities for Children 9.5 0.0 0.0 3.9 Existence of a Swimming Pool 12.7 23.4 44.4 22.4 Existence of a Tennis Court 15.9 13.0 22.2 15.8 Existence of a Workshop 9.5 15.2 3.7 9.9 Well Maintained Common Areas 4.8 4.3 3.7 3.9 Adequate Covered Parking 25.4 15.2 3.7 17.8 Adequate Visitor Parking 7.9 13.0 14.8 12.5 Other 3.2 0.0 0.0 1.3 Total Respondents desiring changes in the Project = 90 (45%) 136. preference for locational factors both in comparison to the other^ age groups and the other features. Those buying above average priced units were fairly evenly divided between the locational factors, features within the unit, and features of the project. To summarize, the projects that are designed for the lower price bracket will be purchased largely by the younger age groups that are mainly concerned with the price. The desired features should therefore be sacrificed in lieu of maintaining a low price. The above average priced units catering to the older group are evenly divided between the location, features of the unit and features of the project. The trade-offs should be made between these groups rather than between them and the price. The final item examined concerning the features of the unit are those that were sales attractions at the time of purchase but have been used infrequently since then. The most frequently mentioned category was that of the sauna, steam bath, and whirl pools (Table 48). This was followed by the games room and surprisingly the swimming pool. Unfortunately the results cannot be translated into proportions as the features available to each unit are unknown. Further investigation is therefore required to reach definite conclusions on this item. 4.10 Level of Satisfaction for Condominium Owners The level of satisfaction experienced by the owners will have a great effect on the future of the concept. As such the last part of the owners' questionnaire inquired into the general level of satisfaction and into three areas specifically; satisfac tion with the management, the behaviour of renters and specific criticisms. 137. TABLE 47 Host Important Reason for The Selection of the Units Reason Location Feature of Features of Price Other the Unit the Project No. % No. % No. % No. % No. % Structure Type Townhouse 7 15.2 11 28.9 15 42.9 36 49.3 0 0.0 Low-Rise 22 47.8 14 36.8 10 28.6 20 27.4 2 100.0 High-Rise 16 34.8 10 26.3 10 28.6 17': 23.3 0 0.0 Total 46 100.0 38 100.0 35 100.0 73 100.0 2 100.0 Age Group Under 30 7 15.2 8 21.0 6 17.1 22 ' 30.1 0 0.0 30 - 39 5 • 10.9 9 23.7 7 20.0 28 38.4 1 50.0 40-49 7 15.2 2 5.3 4 11.4 5. 6.8 0 0.0 Over 49 27 58.7 19 50.0 18 51.4 18 24.7 "1 50.0 Price of Unit Under Average 18 39.1 13 34.2 11 31.4 55 75.3 1 50.0 Price (By Year and Struc- ' ture Type) Over Average 28 60.9 25 65.8 24 68.6 18 24.7 1 50.0 Price (By Year and Struc ture Type) TABLE 48 . Frequency of Unused Sales Attractions by Structure Type Townhouse Low-Rise Hiqh-Rise Total Unused Sales Attractions No. No. % No. % Wo. % Swiriming Pool 15 17.6 3 4.3 1 1.4 22 9.0 Tennis Court 0 0.0 0 0.0 2 ' 2.9 2 0.1 Sames Room 9 10.6 8 11.4 11 15.9 30 12.3 Sauna, Steam, Bath, 16 18.8 11 15.7 15 21.7 48 19.7 Whirlpool Playgrounds 2 2.4 0 0.0 0 0.0 3 1.2 Garden Areas -6 . 7.1 2 2.9 6 . 8.7 14 5.7 Workshop 0 0.0 5 7.1 8 11.6 "15 6.1 Other 2 2.4 4 5.7 2 2.9 8 3.3 Project does riot have any common features 20 23.5 24 34.3 20.3 58 23.8 Ml the features are used regularly 15 17.6 13 18.6 10 14.5 44 18.0 139. 4.11 General Level of Satisfaction The level of satisfaction is likely to be influenced by the extent of the pre-purchase knowledge of the condominium concept. In turn, the level of knowledge may depend on the method of pur chase. Table 49 displays both the source of purchase and the perceived level of information received from the source. The majority of purchases were made from the developers or their sales agents (74.5%), only 25.5% were resales. Of the sales made by the developer, 88% were from the developer's own salesmen, the rest being made through an independent agent. Sixty-four percent of the purchases made from a previous owner were also handled by an independent agent. Hamilton and Roberts hypothesized that the developer's agents, being specialists, would better inform the purchaser than 23 alternate sources . The evidence they received was not conclusive but they concluded the developer's salesmen had done a reasonably good job of educating the purchasers. Independent agents were found to be either very good or very poor, with no middle position. Furthermore, while the responsibility of the vendor or his agent to educate the prospective purchasers was recognized, the purchaser himself must also bear part of the burden. Overall, these earlier conclusions are in accordance with the findings of this study. Of all purchasers, 32% felt they were very well informed, 44% were moderately well informed and 23.5% were poorly informed. There were no significant differences in the level of education based on the type of vendor. Unfortunately, the few number of purchases made from the developer through an independent agent TABLE 49 140. Extent of Purchasers Knowledge by Method of Purchase Source of Purchase Very well i No. nformed % Mode Ini No. jrately [formed % • Po Inf No. orly ormed % From Developer Developer's Salesman Independent Agent Total 41 3 32.0 16.7 57 12 44.5 66.7 30 3 23.4 16.7 44 30.1 69. 47.3 33 22.6 From Previous Owner Directly from Owner-Independent Agent Total 8 11 44.4 . 34.4 6 12 33.3 37.5 4 9 22.2 28.1 19 38.0 18 36.0 13 26.0 Grand Total 63 32.1 87 44 .4 46 23.5 141. or directly from the owner makes the evaluation of the agent's performance relative to the others precarious. Combining the sales made from both types of vendors through an independent agent, the same proportion (77%) of purchasers were very well or moderately well informed as those that purchased from the vendor directly or through his own agent. Independent agents then do not appear to be any better or worse at informing purchasers than the other sources. The owners were asked to what extent their expectations regarding condominium living have been satisfied. Eighty-eight percent reported that they were very well or moderately well satisfied. Only 12% of the respondents indicated being moder ately or very dissatisfied and the analysis of satisfaction by age group, income group, structure type, unit's purchase price, management type, or length of residence provided no clear patterns of satisfaction. However, the level of satisfaction does appear to be positively correlated with the extent of pre-purchase knowledge (Table 50). Developers and agents handling condominiums, interested in the long run success of the condo minium concept, could play an important role in properly educating their customers. The results discussed above paralleled those received when the owners were asked if, knowing what they did of condominium living at the time of the survey, would they still have purchased their unit. Eighty percent responded affirmatively, 8% higher than the response on the Hamilton and Roberts (1973) study. The results reveal the level of satisfaction with condominium living has remained high and is not a major problem area. 4.12 Specific Problem Areas The particular areas that have received owner complaints in the past are the management and the behaviour of renters in the projects. The questionnaire provided a definition of management for the respondents to ensure there would be no confusion as to 24 the meaning . The types of management were divided into two categories: professional management firms and the condominium association. Professional management firms are independent companies that perform the accounting, administrative, and super visory duties on behalf of the strata corporation for a fee. Projects that are managed by the condominium association have the same duties performed, voluntarily by members of the strata corporation, usually by the strata council. Overall, 8 0.9% of the respondents were satisfied with the management. The professional management firms did not rate as highly as the condominium association as only 75% were satisfied under their direction versus 91% for the condominium association. This may be the result of two factors both pertaining to the fact that management firms tend to manage the larger projects (see later section on condominium management). Firstly, the larger average size of the projects means the same number of projects may be poorly managed by both the professional firms and the condominium association, yet a greater number of responses would be recorded against the professional management group. Secondly, the larger TABLE 50 143. Extent of Purchaser's Knowledge by the Level of Satisfaction Level of Satisfaction Very well satisfied Moderately satisfied Moderately dissatisfied Very dissatisfied Total Ver Inf No. y Well ormed % Mod Well No. erately Informed % Poe Inf< No. Drly Drmed % Tc No. tal % 31 32 3 0 44.9 29.4 17.6 0 28 49 10 2 40.6 45.0 58.8 28.6 10 28 4 5 14.5 25.7 23.5 71.4 69 109 17 7 100 100 100 100 66 32.7 89 44.1 47 23.3 202 100 144. the project, the more difficult it is to be in contact with all the residents and the more difficult it is to fully explain all the problems. This would cause greater feeling of alienation and loss of control and hence greater dissatisfaction on the part of the owners. 4.13 Reaction of Tenants The information covering the renters was collected in a four part question that was designed to have only those that had first hand knowledge of renters in the project respond as to their behaviour. In doing so this would eliminate those that were merely repeating heresay and give a clearer indication of the true scope of the problem. There were some problems encountered however as 66 respondents stated they knew of renters in the pro ject yet 88 responded to the question regarding the behaviour of the tenants. Normally this could cast doubt on the validity of the results, however, since the results are nearly unanimous this compensates for the collection problem. 9 6.6 percent of the respondents stated the renters' behaviour was generally worse than that of other owners. It is difficult to understand how or why the renters' behaviour is so poor in compari son to those of other owners. One of the management firms sugges ted the difference was more perceived than real according to the seriousness of the complaints they receive regarding renters. Information is not available to confirm this hypothesis or explain the bias, if any. 145. 4.14 Specific Criticisms Concerning Condominiums The most important specific criticisms are displayed in Table 51. They follow the same pattern established in the previous study with the lack of soundproofing the most common complaint followed by "people problems." Poor soundproofing accounted for 40.5% of the first mentioned complaints and 22.1% of the total. The poor attitude of other owners (19.1% and 19.5%) was next followed by uncontrolled children (9.2% and 9.7%). On the basis of structure type (Table 52) the complaint of poor soundproofing was most prevalent from apartment residents as expected given their higher density. The complaints against children was highest in townhouse responses, again as expected given the greater number of children present. The repetition of poor soundproofing as the single most frequent complaint gives cause to question the design of the projects. As in the discussion of the features of the unit, however, a balancing between cost and benefits must be achieved. Without further information on the price elasticity of the value of soundproofing to the consumers a conclusion regarding the design of the units cannot be reached. The complaints against condominium living are largely the result of higher density living rather than a problem with the concept itself. It is doubtful that complete unanimity will ever be achieved between a group of people living in relatively close association. Only cooperation and understanding of those involved will ensure a reasonable level of satisfaction for all. TABLE 51 146. Most important Criticisms Of Condominiums Number of Times Mentioned First Second Third Total . Criticisms No. % No. % No. % No. % Poor Soundproofing 53 40.5 10 10.0 3 4.5 66 22.1 Poor Construction 10 7.6 21 21.0 6 9.0 37 12.4 Lack of Privacy ' 5 3.8 14 14.0 6 9.0 25 8.4 Poor Attitude of Other Owners 25 19.1 14 14.0 19 28.4 58 19.5 Uncontrolled Children I.2 9.2 9 9.0 8 11.9 29 9.7 Uncontrolled Pets 5 3.8 17 17.0 12 17.9 34 11.4 Poor Management 7 5.3 6 6.0 5 7.5 18 6.0 Poor Upkeep 3 2.3 •• 5 5.0 4 6.0 12 4.0 Other 11 8.4 4 4.0 4 6.0 19 6.4 TABLE 52 Most Important Criticism by Structure Type -First Mentioned Structure Type Townhouse Low-Rise High-Rise Mixed Criticism No. % No. % No. % No. % Poor Soundproofing 13 27.7 25 55.6 13 44.8 2 20 Poor Construction 3 6.4 1 2.2 3 10.3 3 30 Lack of Privacy 4 8.5 1 2.2 0 0 0 0 Poor Attitude of Other 11 23.4 7 15.6 6 20.6 1 10 Owners Uncontrolled Children 7 14.9 3 6.7 1 3.5 1 10 Uncontrolled Pets 4 8.5 1 2.2 0 0 0 0 Poor Management 2 4.3 3 6.7 0 0 2 20 Poor Upkeep 2 4.3 0 0 1 3.5 0 0 Other 1 2.1 4 4.4 5 17.2 1 10 Total 47 100 45 100 29 100 10 100 148. Given the general level of satisfaction noted earlier and the frequency with which condominium owners purchase other condo miniums , it is not likely the complaints expressed in this section are overly serious. 4.15 Tenant's Profile The primary intention of the tenants questionnaire was to determine the proportion of condominium residents that were tenants. These results have been discussed previously. A secondary intention was to provide a profile that could be com pared to the owners. As only 34 tenant questionnaires were re turned only some general statements will be made; the small response does not permit extensive analysis. The majority of the households (88%) contained 2 adults and had no children (62%). The household heads tended to be much younger than those in condominiums as 56% were under 30 years old and only 24% over 4 0 years old. The tenants tended to have a similar income distribution to condominium owners as approxi mately one-half were below $16,000 and the other half above. The respondents were asked if they considered the purchase of a single family dwelling or a condominium unit prior to rent ing their unit. The overwhelming majority in both cases did not consider any purchase (76.5% and 71.4% respectively). There were too few responses as to the reasons why they did not purchase to provide reliable results. When asked their future intentions, 50% definitely planned to purchase a home within the next five years while another 17.6% were uncertain. Of those intending 149. to purchase, 88% intend to purchase a single family dwelling. 4.16 Conclusion At the start of this chapter several objects were outlined: to provide a profile of the existing owners, identify their motivations for purchase, and to establish their level of satis faction with the concept. These objectives have been met. It was found the profile of the owners, their motivations and the level of satisfaction has changed very little from the Hamilton and Roberts study in 1973. This indicates the present oversupply of condominiums is not due to unanticipated changes in the type of consumers or a general level of dissatisfaction with the concept but rather is due to an over zealous development industry. 150. FOOTNOTES 1. Hamilton, S.W. and Roberts, R., Condominium Development and  Ownership, Real Estate Board of Greater Vancouver, Vancouver, 1973. 2. Eger, A.F., "Choice in Housing", Housing: Its Your Move, Volume II, Technical Reports, The Urban Land Economics Division, Faculty of Commerce and Business Administration, University of British Columbia, Vancouver, 1976. 3. Hamilton and Roberts, op. cit. 4. Hamilton, S.W., Davis, I., and Lowden, J., Condominium  Development in Metropolitan Vancouver, The Real Estate Council of British Columbia, Vancouver, 1971. 5. Condominium Research Associates, National Survey of  Condominium Owners, Condominium Research Associates, Toronto, 1970. 6. Norcross, C, Townhouses and Condominiums: Residents' Likes and Dislikes, The Urban Land Institute, Washington, D.c, 1973. 7. Statistics Canada, 1971 Census of Canada, Population -Age- Groups, Catalogue 92-715, Volume I, Part 2, April, 1973. 8. The respondents indicated they were employed in one of 13 categories which were later reduced to 5. Professionals consisted of professionals and managerial positions, semi skilled and skilled were tradesmen, sales, service, and clerical workers, the "other" category is made up of home-makers, students, and those that classified themselves as other, the unskilled and retired classifications need no explanation. 9. Eger, op. cit., p. 17. 10. The average family income in B.C. during 1976 was $16,915. (Source: Statistics Canada, Income Distribution by Size  in Canada, Catalogue 13-206, 1976.) This figure was adjusted upwards by 8% to give an estimated figure of $18,270. 11. Hamilton and Roberts, op. cit.,. p. 27. 12. A $40,000 unit with a 20% down payment, monthly property taxes of $50.00 and a mortgage at 11% would require a minimum of $17,000 income to qualify for a 25% debt service ratio. 13. Brown, Ian, That Classy Touch - Condominiums Promise a Way . of Life, Financial Post, Maclean-Hunter, Toronto, Ontario, July 2, 1977. 151. 14. Hamilton and Roberts, op. cit., p. 43. 15. Ibid. p. 27. 16. Ricketts, Mark, No Down Payment Lures the Renters, Financial Post, Maclean-Hunter, Toronto, June 4, 19 77, p. 2. 17. Eger, op. cit., p. 11. 18. The 13 variables used were:-1. household income 2. loan-to-value ratio 3. existence of second mortgage 4. percentage of previous home ownership 5. existence of working spouse 6. total monthly payments 7. condominium purchase price 8. marital status 9. age of household head 10. occupation of household head 11. number of children 12. education of household head 13. reason for moving 19. Hamilton and Roberts, op. cit., p. 37. 20. See Appendix 4.1. 21. Hamilton and Roberts, op. cit., p. 44. 22. Norcross, op. cit. pp. 8 and 10. 23. Hamilton and Roberts, op. cit., p. 35. 24. The definition of management which was provided was as follows:-"management" refers to the administration of the by-laws, maintenance fund, etc., not to the caretaking or maintenance function itself." l 152. Chapter 5 Condominium Development and Management 5.1 Introduction This chapter will deal with the participants in the condo minium market that are responsible for the development of the projects and their management on completion. The developers will be examined first with the objective of defining the composition of the development sector and the characteristics of the firms involved. The management and administration of the condominium projects is the responsibility of the strata councils and the professional management firms. Both groups will be examined but the major emphasis will be on the management firms. 5.2 Data Collection and Sample. Size - Developers Two sources of data were used in the examination of condo minium developers. First, the name of the developers was col lected from the strata plans registered in the Land Registry Offices. This method provided comprehensive information on the activities of developers but it is limited by the following factors: a) some names were illegible, b) the practice of establishing a separate company for the development of each strata project, and dissolving the company on completion of the project. Consequently a single principal or group of principal could be respon sible for several developments but their name could not be linked to all projects, 153. c) the use of subsidiary firms to develop the projects. Again the linking of the subsidiaries together and to the parent was not possible,"'" d) firms changing their name. Where the change was known the development activities were grouped under a single code, e) time and budget constraints precluded the collection of all the developers' names in the Kamloops Land Registry Office, however in 50% of the projects the developer was identified. Utilizing the L.R.O. data it was possible to identify the devel-2 opers of 94% of the units and 90% of the projects. The second data source was a survey of developers conducted during the summer of 1977. The names were identified from the L.R.O. list of developers, however there was significant diffi-3 culty in contacting the registered firms. This was the result of the limitations in the original data and subsequently the companies not being listed in the telephone or business direct ories. Sixty-five firms active in the Metropolitan Vancouver and Victoria markets were sent questionnaires and 25 were re turned completed. These firms accounted for 35% of the 13,325 units in these metropolitan areas and 26% of the 18,925 units developed in the province, during the 1976-1977 period. Eleven of these firms were also interviewed. 154. 1 Developers' Activities In total, 1,261 separate developers' names were identified from the L.R.O. records, this in itself indicates there are a large number of participants active in this aspect of the condominium market. The identified firms were responsible for 43,664 units and 2,128 projects from 1968 to November 30, 1977. The distributions of these developers' activities are displayed in Table 53. The first point to note in Table 53 is that the majority of firms (78%) had produced only one project, these accounted for 46% of the projects and 35% of the units. Conversely, only 14 firms (1%) had done more than 10 projects but these involved 15% of the projects and 24% of the units. Comparing the activity in terms of the number of units produced a similar dichotomy. Thirty-four percent of the firms had done only 1-2 units, essentially duplexes, while 77 firms (6%) had produced over 99 units. The latter firms were responsible for 21% of the projects and 56% of the units. One may now conclude that while there are a signifi cant number of entrepreneurs only a small proportion are responsible for a significant portion of all developments. The same conclusion is applicable to the Metropolitan * Vancouver and Victoria areas (Table 54). Eighty percent of the *It should be noted that these tables refer to the activity of the developers within each subarea and therefore adding the number of firms in any one size category across the three areas will not necessarily equal the number of firms in that category when the province as a whole is considered. Regional totals, however, will always sum to the provincial total. TABLE 53 DEVELOP ER ACTIVITY PROVINCE A. DEVELOPER'S PROJECT DISTRIBUTION # Proj ects FIRM* S CHARACTERISTICS per Firm # Firms # Proj ects # Units UNIT D I S T R I BUT ION DEVELOPERS * AVERAGE PROJEC r SIZE DISTRIBUTION (UNITS) 1-2 3-9 10-19 20-39 40-59 60-99 100-499 500+ 0-2.99 3-4.99 5--9.99 10-19.99 20-29.99 30-49.99 50-99.99 100+ 1 979 979 15167 427 135 145 179 54 23 16 0 427 57 78 145 105 105 46 16 2 143 286 4812 0 54 15 23 19 23 9 • 0 48 6 15 23 19 23 8 1 3- 4 81 271 5803 0 26 3 7 9 13 22 1 25 A 1 6 13 14 13 4 2 5- 9 44 278 7335 0 0 16 1 2 3 20 2 16 1 3 4 3 8 9 0 10-19 8 111 1879 0 0 0 4 0 1 2 1 4 0 1 0 0 3 0 0 20+ 6 203 8668 0 0 0 0 2 0 0 4 2 0 0 0 1 1 1 1 B. DEVELOPER'S UNIT DISTRIBUTION # Units par Firm FIRM'S CHARACTERI S T I C S J # Proj ects # Units PROJECT DISTRIBUTION DEVELOPERS' AVERAGE PROJECT SIZE DISTRIBUTION (UNITS) Firms 1 2 3-4 5-9 10-19 20+ 0-2.99 3-4.99 5-9.99 10-19.99 20-29.99 30-49.99 50--99.99 100+ 1- 2 427 427 853 427 0 0 0 0 0 427 0 0 0 0 0 0 0 3- 9 215 327 1157 135 54 26 0 0 0 73 ' 64 78 0 0 0 0 0 10-19 179 291 2514 145 15 3 16 0 0 16 3 15 145 0 0 0 0 20-39 214 306 6018 179 23 7 1 4 0 4 1 6 24 105 74 .0 0 40-59 86 180 4081 54 19 9 2 0 2 2 . 0 2 9 19 31 23 0 60-99 63 146 4540 23 23 13 3 1 0 0 0 2 5 9 24 23 o 100-499 69 260 13360 16 9 22 20 ' 2 0 0 0 0 2 8 22 19 18 500+ 8 191 11141 0 0 1 2 1 4 0 0 0 0 1 2 3 2 156 . TABLE 53 (cont'd) DEVELOPER ACTIVITY - PROVINCE C. DEVELOPER'S AVERAGE PROJECT SIZE Average Devel oper's Project Size # Firms F I R M ' c CHARACTERIS TICS # Proj ects # Units 1-2 UNIT D I S T R I B U T I ON 100-499 500+ PROJECT DISTRIBUTION 20+ 3-9 10-19 20-39 40-59 60-99 1 2 3-4 5-9 10-19 0- 2.99 522 810 1619 427 73 16 4 2 0 0 0 427 48 25 16 4 2 3- 4.99 68 88 327 0 64 3 1 0 0 0 0 57 6 4 1 0 0 5- 9.99 103 164 1154 0 78 15 6 2 2 0 0 78 15 6 3 1 0 10-19.99 185 258 3762 0 0 145 24 g 5 2 0 145 23 13 4 0 o 20-29.99 142 245 5844 0 0 0 105 19 9 8 1 105 19 14 3 0 1 30-49.99 153 321 11744 0 0 0 74 31 24 22 2 105 23 13 8 3 1 50-99.99 68 198 13861 0 0 0 0 23 23 19 3 46 3 4 9 0 1 100+ 20 44 5353 0 0 0 0 0 0 18 2 16 1 2 0 0 1 firms in Metropolitan Vancouver and 76% in Metropolitan Victoria had developed only one project. One percent and less than 1% of the firms in each area respectively had developed 10 or more pro jects involving 32% of the units in Metropolitan Vancouver and 13% of the units in Metropolitan Victoria. Examining the number of units per firm in each area reveals a similar trend. Again it can be concluded that a small number of firms are responsible for a.significant portion of the development in each area. It is also noted that these firms are in the largest categories in Metropolitan Vancouver but moreso in the medium range in Metro politan Victoria. The most significant number of firms in each area are small in terms of number of units and number of projects Comparisons between the rest of the Province area and the other regions cannot be made with any accuracy due to the data collection problems in the Kamloops L.R.O. as noted previously. Having examined the developers' activities in general terms the two polar extremes will be examined in greater detail. 5.3.2 The Top Twenty Table 55 presents the top twenty firms in terms of the numbe of units produced. The top five firms produced 62.5% of the pro jects and 58.9% of the units of the total production of the top twenty firms. This accounted for 7.4% of the projects and 20.1% of the units in British Columbia. The additional fifteen firms increased the percentage of total production to 11.7% of projects and 34.1% of units in the province. The first conclusion that can be drawn is that even within the group of the largest firms there is a small number that dominate in terms of production. 158 . I TABLE 54 DEVELOPER ACTIVITY BY R3GION Province Metropolitan Vancouver Metropolitan Victoria Rest of Province # Projects Firms n<=>r f i rn $ % Projects Units # % # % Firms # % Projects Units # % # % Firms . # % Pr # Djects Units % t • % Firms # % Projects Units # # i 1 979 78 979 46 15167 35 557 80 557 . 46 8663 29 213 76 213 50 2560 46 249 77 249 50 4875 57 2 143 11 286 13 4812 11 65 9 130 11 2356 8 35 12 70 16 941 17 43 13 86 17 1276 15 3-4 81 6 271 13 5803 13 39 6 132 11 3818 13 21 8 71 17 924 17 15 5 54 11 1141 13 5-9 44 3 278 13 7335 17 23 3 144 12 5397 18 10 4 62 14 1013 18 12 4 76 15 1147 13 10-19 8 <1 111 5 1879 4 6 <1 87 7 3233 11 1 <1 13 3 69 13 1 <1 10 20 20 <1 20+ 6 <1 203 10 8668 20 4 <1 149 12 6183 21 0 0 0 0 0 0 1 <1 26 5 52 1 Total 1261 100 2128 100 43664 100 694 100 1199 100 29650 100 280 100 429 100 5507 100 322 100 501 100 8511 100 I units per firm 1-2 427 34 427 20 853 2 270 39 270 23 540 2 112 40 112 26 223 4 59 18 59 12 118 1 3-9 215 17 327 15 1157 3 102 15 151 13 531 2 54 19 87 20 307 6 65 20 94 19 353 4 10-19 179 14 291 14 2514 6 81 12 123 10 1159 4 41 15 78 18 568 10 61 19 95 19 847 10 20-39 .214 17 306 14 6018 14 105 15 150 13 3024 10 34 12 • 44 10 942 17 80 25 108 22 2201 26 40-59 86 7 180 9 4081 9 55 8 100 8 2592 9 11 4 22 5 550 10 21 7 53 11 987 12 60-99 63 5 146 7 4540 10 32 5 69 6 2284 8 19 7 48 11 1385 25 17 5 29 6 1205 14 100-499 69 5 260 12 13360 30 42 6 : 189 16 9674 33 9 3 33 9 15 32 28 19 6 63 13 2800 33 500 + 8 <1 191 9 11141 26 7 1 147 12 9846 33 0 0 0 0 0 0 0 0 0 0 0 0 Total 1261 100 2128 100 4 3664 100 694 101 1199 100 29650 100 280 100 429 100 5507 100 322 100 501 100 8511 100 Average developers' project size 0-2.99 522 41 810 38 1619 4 314 45 4 50. 38 900 3 135 48 188 4 4 375 7 88 27 180 36 360 4 3-4.99 68 5 88 4 327 <1 31 4 32 3 117 0 22 8 35 8 135 2 17 5 23 5 83 1 5-9.99 103 8 164 8 1154 3 44 6 61 5 438 1 24 9 47 11 321 6 33 10 43 9 291 3 10-19.99 185 15 258 12 3762 9 91 1 153 13 2243 8 ' 40 14 62 14 944 17 63 20 84 17 1188 14 20-29.99 142 11 245 12 5844 13 69 10 100 8 2419 8 23 8 41 10 1009 18 50 16 66 13 1589 19 30-49.99 153 12 321 15 11744 27 87 13 211 18 7842 26 23 8 37 9 1360 25 45 14 69 14 2429 29 50-99.99 68 5 198 9 13861 32 44 6 160 13 11550 39 11 4 17 4 1121 20 21 7 29 6 1748 21 100+ 20 3 44 2 5353 12 14 2 32 3 4141 14 2 1 2 .<.! 242 4 5 2 7 1 823 10 Total - r 1261 100 2128 100 4 36G4 100 694 100 11- - 100 29 6 50 100 280 100 429 100 5507 100 322 100 501 100 8511 100 159. TABLE 55 PERCENTAGE OF DEVELOPMENT - TOP 20 DEVELOPERS IN TERMS OF UNITS percentage of Average15 pSuctdon Percentage Gf # # Project ^oauction all production (B.C.) TO£ Project Units Size Project Units Project Units 1 - 5 172 9,347 54.3 62.5% 58.9% 7.4% 20.1% 6 -10 39 2,754 70.6 14.2 17.4 1.6 5.9 il -15 35 2,074 59.3 12.7 13.1 1.5 4.5 16 -20 29 1,686 58.1 10.5 10.6 1.2 3.6 TOTAL 275 15,861 57.7 100.0%* 100.0 11.7% 34.1% * Rounding Error (1) Average for all Projects in B.C. 19.8 units/proj. 160. All of the top five firms in terms of units are in the top ten firms in terms of projects. Of the other fifteen, however, only four are in the top twenty firms in terms of projects. The dominance of the production of units vis-a-vis the production of projects is explained by the average project size. The average project size for the top twenty firms was 57.7 units per project versus 18.8 for the province. The top five firms in terms of projects (Table 56) were responsible for 50% of the projects and 56% of the units of the top twenty firms. The production of the top five firms accounted for 7.8% of the projects and 14.2% of the units in the province. The remaining firms accounted for an additional 7.8% of all pro jects and 11.3% of all units developed in the province. The average project size of these twenty firms is considerably smaller than that of the top firms in terms of units. Much of this is attributed to the fact that eight of the largest firms in terms of projects only produced duplexes (totalling 116 projects, 232 units). The firms that had the largest average project size are presented in Table 57. Only two of these firms were in the top twenty in terms of units, and only one was in the top twenty in terms of projects. Further, these firms only accounted for 1.9% of all units in British Columbia, far less than that of the other two "top twenty". Therefore the firms producing the largest average project sizes are not responsible for a significant proportion of the number of units in the province. TABLE 56 PERCENTAGE OF DEVELOPMENTS -• TOP 20 DEVELOPERS IN TERMS OF PROJECTS AVERAGE % OF TOP PROJ 20 PRODUCTION PROJ # ECTS PROJ TOP ECTS UNITS SIZE ECTS UNITS 1- 5 183 6,606 36.1 50.0% 55,9% 6-10 84 2,998 35.7 23.0 25.4 11-15 56 1,627 29.1 15.3 13.8 16-20 43 583 13.6 11.7 4.9 TOTAL 366 11,814 32.3 100.0% 100.0% 161. % OF ALL PRODUCTION (B.C.) PROJ ECTS UNITS 7.8% 14.2% 3.6 6.5 2.4 3.5 1.8 1.3 15.6% 25.5% (1) Average for all Projects in B.C. 19.8 units/project. 1621 TOP TWENTY DEVELOPERS  IN TERMS OF AVERAGE PROJECT SIZE % OF TOP 20's % OF ALL PRODUCTION PRODUCTION (B.C.) PROJ # ECTS PROJ PROJ TOP ECTS UNITS SIZE ECTS UNITS ECTS UNITS f i- 5 7 1,221 174.4 15.9% 22.8% 2.6% 0.3% 6-10 5 727 145.4 11.4 13.6 1.6 0.2 11-15 6 698 116.3 13.6 13.0 1.5 0.3 19-20 26 2,707 104.1 .. 59.1 50.6 5.8 1.1 TOTAL 44 5,353 121.6 100.0 100.0 11.5 1.9 B.C. Average project size = 19.3 units per project. 163. One is cautioned on the interpretation of the last conclusion. It referred to the average project sizes while the following top twenty refers to the developers of the largest projects. These projects ranged in size from 507 units to 150 units in a single phase and account for 9.3% of the units in the province. Ten of these projects were developed by the top six firms in terms of units and projects. An additional 15% of the projects were developed by firms in the top ten in terms of units. If the largest forty projects (507 units to 129 units in size) are con sidered, 75% of them were developed by firms in the top twenty in terms of units. From the preceding information it can be concluded that the largest twenty firms in terms of units obtained this status by either producing several medium-sized projects (35% of the firms produced 13 or more projects, aver aging 51.5 units per project) or a few large-sized projects (65% produced less than 10 projects, averaging 73.8 units per project). The geographical distribution of the production of the top twenty firms in terms of units is presented in Table 58. These firms are heavily concentrated in the Metropolitan Vancouver market. Ninety-two percent of the projects and units these firms developed lie within this area and they represent 20% of the pro jects and almost one half of the units in this region. Further, 28% of the units and 13% of the projects in Metropolitan Vancouver were developed by the top five firms. 5.3.3 Small Development Firms Small developers are defined as those having produced less 164 . TABLE 58 PERCENTAGE OF DEVELOPMENT ACTIVITY BY AREA - TOP 20 FIRMS IN TERMS OF UNITS METROPOLITAN VANCOUVER METROPOLITAN VICTORIA REST OF PROVINCE % OF TOTAL DEVELOPMENT IN REGION % OF TOTAL DEVELOPMENT IN REGION % OF TOTAL DEVELOPMENT IN REGICN TOP FIRMS PROJ ECTS UNITS PROJ ECTS UNITS PROJ ECTS UNITS PROJ ECTS UNITS PROJ ECTS UNITS PROJ ECTS UNITS 1- 5 161 8,613 12.8% 28.2% 3 147 0.7% 2.7% 8 587 1.2% 5.7% 6-10 37 2,654 2.9% 8.7% 0 0 0.0% 0.0% 2 100 0.3% 1.0% 11-15 27 1,608 2.1% 5.3% 7 448 1.6% 8.1% 1 18 0.1% » 0.2% 16-20 29 1,686 2.3% 5.5% 0 0 0.0% 0.0% 0 0 0.0% 0.0% TOTAL (1-20) 254 14,561 20.1% 47.7% 10 595 2.3% 10.8% 11 705 1.7% 6.8% TOTAL IN REGION 1,262 30,502 100% 100% 432 5,528 100% 100% 646 10,381 100% 100% 165. than 3 projects or under ten units, their activity was noted previously where it was shown they accounted for a large propor tion of the firms and projects but a small share of the units. Ninety percent of the firms provincially produced less than 3 projects involving 59% of the projects and 46% of the units. Similar proportions were found in Metropolitan Vancouver, Victoria and the rest of the Province. A similar trend was noted for firms producing under 10 units. These figures indicate the significant ease of entry and exit in the condominium development field. Referring again to Table 53 it can be seen that of the firms doing under 3 projects, 38% produced duplexes (average project size 0-2.99) and 44% of those doing only one project did only a single duplex. The balance of the firms doing only one project were distributed across the full range in terms of number of units produced and average project size. Sixteen (1.6%) of the firms did projects of over 100 units in size and 35% of the firms doing the 20 largest projects did only one project. Of the firms producing only 1-2 units all of them developed a single duplex except for one which was a strata lot subdivision. Sixty-three percent of the firms producing 3-9 units did so in only one project, none produced more than 4 projects. The average project sizes were evenly distributed amongst the three smallest categories, 0-2.99, 3-4.99, and 5-9.99 units per project. Part C .of Table 53 shows the developer's average project size. Eighty-two percent of the firms producing 0-2.99 units per project on average did so in only one project. There were, however, 6 (1%) 166. which did ten or more such projects, these were noted previously in the discussion of the top 20 firms in terms of projects pro duced. The two firms producing 20 or more duplex projects were in the top 5 firms in terms of projects but were not in the top one hundred and sixty developers in terms of units. 5.3.4 Developers' Activity Over time The distribution of developers' activity provincially over time is presented in Table 59 and condensed in Table 60. From 1968 to 197 7 there has been a trend towards more firms doing more projects and units per year (Table 59). Proportionally, however, there has been only a very modest trend towards firms doing more projects per year and a decline in firms doing a large number of units per year (Table 60). The average project size has decreased significantly from 1968 to 1977, from 44.6 to 13.62 units per project. Thus, the rapid growth in condo minium units that has occurred over the past decade is more the result of an increase in the number of firms and the development of more, but smaller projects, than through a trend towards pro ducing larger projects. A similar trend was noted in the Metro politan Vancouver and Victoria areas. It is interesting to note that despite this trend, 60% of the twenty largest projects have been developed since January 1, 1976. 5.3.5 Developers of Unique Projects The developers of two unique types of projects were selected for further examination, first, the developers of non-residential 167. TABLE 59 DEVELOPERS ACTIVITY BY YEAR AND''SIZE B.C. NUMBER OF FIRMS # PROJECTS PER FIRM PER YEAR 1 2 3- 4 5- 9 10-19 20+ # UNITS PER FIRM PER YEAR 1- 2 3- 9 10-19 20-39 40-59 60-99 100-499 500+ 1968 4 0 1 0 0 0 0 0 1 1 0 1 2 0 1969 17 1 0 0 0 0 1970 33 3 2 0 0 0 8 4 8 7 3 • 5 3 0 1971 65 5 2 1 0 0 7 11 17 20 4 8 6 0 1972 76 9 3 1 0 0 16 11 15 24 6 9 8 0 1973 104 9 4 1 2 0 17 18 19 36 11 10 8 1 1974 160 12 5 2 1 0 45 19 35 41 13 14 12 1 1975 223 21 14 3 2 0 86 34 37 55 21 16 13 1 1976 328 32 12 12 4 1 142 70 56 62 27 15 15 2 1977 319 39 12 8 3 0 159 96 35 47 24 12 6 2 168 . ! TABLE 59 (cont'd) DEVELOPERS ACTIVITY BY YEAR AND SIZE B.C. NUMBER OF FIRMS DEVELOPERS AVERAGE PROJECT SIZE PER YEAR 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 0-2.99 0 0 10 9 16 21 50 100 177 196 3-4.99 0 0 1 4 5 7 6 9 17 28 5-9.99 0 0 1 7 6 10 9 13 32 40 10-19.99 1 5 8 . 15 19 19 37 41 48 34 20-29.99 0 7 5 11 14 19 19 40 45 29 30-49.99 2 1 5 13 15 28 34 34 39 35 50-99.99 1 3 6 9 10 10 20 23 23 15 100+ 1 2 2 5 4 6 5 3 8 4 169 TABLE 60 SIZE DISTRIBUTION OF DEVELOPERS A ACTIyTT-T BY YEAR - B.C. PROJECTS PER FIRM PER YEAR UNITS PER FIRM PER YEAR DEVELOPERS AVERAGE PROJECT SIZE OVERALL AVERAGE PROJECT SIZE (UNITS/PROJECT) 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 # % # % # % # % # % # % ff % # % # % # % 1-4 5 100 18 100 38 100 72 99 88 99 117 98 177 98 258 98 372 96 370 97 5+ 0 0 0 0 0 0 1 1 1 1 3 2 3 2 5 2 17 4 11 3 1-39 2 40 13 72 27 71 55 75 66 74 90 75 140 78 212 81 330 85 337 88 40+ 3 60 5 28 11 29 18 25 23 26 30 25 40 22 51 19 59 15 44 12 -19.99 1 20 5 28 20 53 35 45 46 52 57 48 102 76 163 62 274 70 298 78 20+ 4 80 13 72 18 47 38 55 43 48 63 52 78 24 100 38 115 30 83 32 44.6 35 .3 28.0 32.3 28.2 25.7 25 .5 20.8 16.6 13.62 170 projects and secondly, those that were responsible for condominium conversions. (Non-residential and conversion projects are dis cussed in Chapter 6.) All non-residential (warehouse, commercial, and mixed residential and commercial) developers were small in terms of both projects and units. Of the 39 developers of non residential projects, only 10% did more than one project, only 18% did more than 10 units, and nore did more than 65 units. Non residential developers concentrated their activities in this seg ment of the market; only 7.6% of the developers of non-residential projects did residential projects as well, and none were involved in the development of support structure, bare land or lot sub division projects. The developers who were active in the resi dential market did only two projects (one residential and one non-residential), and none of the residential projects contained more than twenty-five units. Thus one may conclude that non residential condominium developers are small developers active only in this submarket. Condominium conversion also tends to be a "one-shot" activity The developers of fourty-six conversion projects could be identi fied from the data. Ninety-three percent of the developers in volved did only one such project. Further, for 69% of the firms, this conversion project represented their entire activity in the condominium market. A further 21% were involved in only one other condominium project. Thus, only 9.5% of the firms active in con versions did two or more non-conversion condominium projects. Five percent of the firms which did condominium conversion project 171. were in the top twenty firms in terms of number of units and number of projects; none of these did more than one conversion project. 5.4.1 Developers' Characteristics: The Survey The respondents to the developers' survey included the developers of thirty-three percent of the units, and fourteen percent of the projects in Metropolitan Vancouver, and fifteen percent of the units and six percent of the projects in Metro-4 politan Victoria. The respondents included seven of the twenty largest producers of units, and four of the top twenty producers of projects, in the province of British Columbia. It also includes nine developers who had developed only one or two projects, and four which developed fewer than forty units. Thus the survey includes a reasonable cross-section of firms active in the industry, although it does omit the large number of duplex developers who are active in the province. On the basis of this survey, a description of the character istics of firms active in the industry during the 1976-1977 period, and during the ten year period commencing in 1968, is presented in the following sections. For purposes of analysis, developer re sponses were tabulated according to three arbitrary size classes on the basis of the total number of units they had produced, small (fewer than 60 units); medium (61-200 units), and large, (more than 200 units). This permits characterization of the indus try according to both general aspects and variation according to developer size. 172. 5.4.2 Developers' Involvement in the Condominium Market The extent to which developers are involved in condominium development is examined in two ways, first the percentage of their total income derived from their activity (Table 61) and secondly, the ranking of real estate activities in order of importance (Table 62). Twelve percent of the respondent firms were active only in condominium developments. Thirty percent of all firms derived between 75 and 100% of their income from condominium developments while 35% derived under 25% from this source. The majority of large firms (57%) received over three-quarters of their income from condominiums. The medium and small firms ten ded to be found at the opposite end of the scale, 67% of medium and 50% of small firms received less than half their income from condominium developments. These figures correlate with the rank ing of the sources of revenue for the respondent firms. Thirty-seven percent of all the firms ranked condominium development first as a source of revenue. Other areas of import ance were multiple unit rental development (16.7%), land develop ment (12.5%), and commercial development (12.5%). The same trend was noted when the total rankings are considered. As was seen when the percentage of income was considered, large firms placed more importance on condominium development than small or medium firms. They also tended to be more active in land development and less active in commercial development than the other groups. On the basis of this evidence one can conclude that large firms view condominium development as a primary activity while the smaller firms consider it as secondary. TABLE 61 PERCENTAGE OF INCOME DERIVED FROM CONDOMINIUM DEVELOPMENT  By size Percentage of In com* 2 All Firms . Large Medium Small 75 - 100% 30.0% 57.2% 11.1% 25.0% 50 - 74% 20.0% 14.3% 22.2% 25.0% 25 - 49% .15.0% 14.3% 22.2% 0.0% 0 - 24% 35.0% 14.3% 44.4% 50.0% Total 100.0% 100.0% 100.0% 100.0% Response Rate =80% 174. TABLE 62 MDST IMPORTANT AREAS OF REVENUE FOR CONIX MINIuTl DEVELOPERS ALL D E V E L 0 P E R S SM? JX DEVELOPERS MEDIUM D EVELOPEF S I JARGE DES /ELOPERS AREA/RANKING 1st 2nd . 3rd TOTAL 1st 2nd 3rd TOTAL 1st 2nd 3rd TOTAL 1st 2nd 3rd TOTAL Condominium/ Development 37.5% 23.8% 31.6% 31.3% 16.7% 33.3% 33.3% 27.8% 33.3% 12.5% 57.1% • 33.3% 55.6% 28.6% 0.0% 31.8% Commercial Development 12.5 14.3 15.8 14.1 16.7 33.3 16.7 22.2 22.2 12.5 14.3 16.7 11.1 0.0 16.7 9.1 Industrial Development 4.2 14.3 5.3 7.8 16.7 16.7 0.0 11.1 0.0 12.5 14.3 8.3 0.0 14.3 0.0 4.5 Single Family Residential Development 8.3 14.3 5.3 9.4 0.0 16.7 16.7 11.1 11.1 0.0 0.0 4.2 0.0 28.6 0.0 9.1 Land Development 12.5 28.6 26.3 21.9 0.0 0.0 33.3 11.1 11.1 62.5 14.3 29.2 22.2 14.3 33.3 22.7 Multiple Unit Rental Development 16.7 4.8 10.5 10.9 33.3 0.0 0.0 11.1 22.2 0.0 0.0 8.3 0.0 14.3 33.3 13.6 Commercial/ Industrial Investment 0.0 ' 0.0 5.3 1.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 16.7 4.5 Residential Real Estate Services 8.3 0.0 0.0 3.1 16.7 0.0 0.0 11.1 0.0 0.0 0.0 0.0 11.1 0.0 0.0 4.5 TOTAL 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% RESPONSE RATE = 96% The data represented in the following two sections and the one on the management of completed projects by the developers (Section 5.4.5) refers to a specific project each respondent had developed. 5.4.3 Project Financing The development of real estate projects generally utilizes three basic sources of financing - the developer's internal funds and lines of credit, interim or construction financing (short-term) and first mortgage financing (long-term). Table 63 displays the sources of financing for the respondent firms. Chartered banks and trust companies are the most heavily relied on sources of funds which reflects their dominance in the residential mortgage market. ~* The; majority of firms (58%) utilized interim financing from the chartered banks while 12.5% relied on their own funds or their line of credit. The small firms placed the greatest reliance on the chartered banks (82.5% versus 33.3% and 62.5% for the medium and large firms respectively) and in no instances did they use their own funds. Medium sized firms were spread fairly evenly across all sources of financing while the large firms predomin ately received funds from the chartered banks. Twenty-five per cent of the large developers did not use any external sources other than their line of credit. The sources of first mortgage financing were more evenly divided than those of interim financing with the chartered banks (29.2%) and the trust companies (33.3%) being the dominant sources. 176. SOURCE OF FINANCING BY TYPE AND DEVELOPER'] SIZE INTERIM FINANCING FIRST MORTGAGE FINANCING SOURCE OF INTERIM + FIRST MORTGAGE THE SAME SOURCE BY DEVELOPER SIZE BY DEVELOPER SIZE BY DEVELOPER SIZE ALL FIRMS LARGE MEDIUM SMALL ALL FIRMS LARGE MEDIUM SMALL ALL FIRMS LARGE MEDIUM SMALL CHARTERED BANK 58.3% 62.5% 33.3% e 85.7% 29.2% 50.0% 22.2% 14.3% 20.8% 42.9% 22.2% 0.0% TRUST COMPANY 8.3 0.0 11.1 14.3 33.3 12.5 33.3 57.1 8.3 0.0 11.1 14.3 MORTGAGE LOAN CO. 4.2 0.0 11.1 0.0 8.3 0.0 11.1 14.3 4.2 0.0 11.1 0.0 OTHER 16.7 12.5 33.3 0.0 16.7 37.5 11.1 0.0 4.2 0.0 11.1 0.0 NONE - 12.5 25.0 11.1 0.0 12.5 0.0 22.2 14.3 TOTAL . 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 37.5% 42.9% 55.5% 14.3% • SOURCE.NOT THE SAME 62.5% 57.11% 44.5% 85.7% RESPONSE RATE = 96% 177. The large firms tended to use the chartered banks more than other sources while the smaller developers relied more on trust com panies. It is interesting to note that none of the large firms went without long-term mortgage funds but 22.2% of medium sized firms and 14.3% of small firms did. Approximately 37% of all firms used first mortgage and interim financing from the same lender. Over one half of these were with chartered banks. Forty-three percent of large firms used the same lender for both loans, all of which were made with chartered banks. On the other hand only 14.3% of the small firms had the same lender for both loan types and these were all arranged with trust companies. The medium sized firms were again distributed amongst all the sources. The pattern that is evidenced here is one of the large firms arranging their long and short term fin ancing (where needed) with the chartered banks (usually the same lender) while the small firms arrange their interim financing with the chartered banks and their first mortgage financing with the trust companies. In the personal interviews, developers revealed that obtain ing financing was not generally a problem. This must be qualified somewhat as the current poor market condition and corresponding long absorption periods have caused lenders to be more cautious than in the past. Greater scrutiny of the borrower's covenant and the project's marketability is given before the loans are approved. 5.4.4 Development Process -The questionnaire was not designed specifically to investi-TABLE 64  AVERAGE DEVELOPMENT PERIOD (MONTHS) STRUCTURE TYPE LOW RISE HIGH RISE TOWNHOUSE TOTAL ALL DEVELOPERS Municipal Approval 5.7 10.0 9.5 8.4 Construction 9.3 13.2 11.4 11.4 TOTAL 15.1 20.8 18.0 18.7 Start of Construction to Date of Registration 7.9 10.8 7.2 8.8 179. gate the development process but questions referring to three areas were asked. These included the length of the development period, the method of initiation, and the developer's perception of the consumer's preferences. For a more detailed examination of developers of multiple family dwellings readers are referred 7 8 to D.D.Ulinder and M.A. Goldberg or M.A. Goldberg . The average municipal approval and construction periods are shown in Table 64. Goldberg and Ulinder cited a major concern by developers over the long delays encountered in the approval 9 process. In all instances the construction period was longer 4 than that needed to receive municipal approval, but the difference was not significant in the case of townhouse and high-rise develop ments. Referring back to Chapter 2, Section 2.3.2, townhouse and high-rise projects, tended, to. be. larger, than, low-rise developments .... Hence it is possible these developments required rezoning, land use contracts, or extensive impact studies, therefore accounting for the longer approval periods. Nevertheless, the requirements for municipal approval nearly doubled the development period for high-rises and townhouses. The tabulation of the development period by the size of the firm did not reveal any systematic differences. What variation did exist appeared to be explained by the type of development rather than the size of firm. Table 65 tabulates the responses to the the question concern ing the initiation of the development. Thirty-five percent of the firms planned the project first, then select an appropriate site. 180. The balance reversed the process, first selecting a site, then planning the development. The same distributions were found by Goldberg in an earlier study.^ The majority of large (75%) and small firms (86%) selected a site first then planned the project while the medium sized firms were more evenly split bet ween the two processes. This is likely due to the medium size firms constructing mainly low-rise projects which do not have to be tailored as specifically to the site as do townhouse and high-rise developments. The final question regarded the developers' perception of market preferences of consumer groups. The most important fea tures, as perceived by the developers, (Table 66,) for a success ful condominium project aimed at the lower income groups were low price, location, and low down-payment (or simply price and location). For the upper income group the most important features were perceived to be location, layout of the unit and the size of the unit (or location and features of the unit). When these results are compared with the most important 6 reasons for the selection of the unit as indicated by the owners (Chapter 4, Table 47) the developers appear to have accurately assessed the desires of the lower income group. Forty-three percent of owners with incomes below $16,000 indicated price as their most important reason, followed by 26% who indicated loca tion as the primary reason for the selection bf their unit. On the other hand, the upper income group (over $24,000 per year) showed a more even distribution of primary reasons for the selection of units than the polarization indicated by the developers. 181. TABLE 65 METHOD OF DEVELOPMENT Developer Size All firms Large Medium Small Plan project then select site 34.8% 25% 57.1% 14.3% Select site then plan project 65.2% 75% 42.9% 85.7% Response rate = 9 2% . 182. TABLE 66 DEVELOPERS' PERCEPTION OF CONSUMER PREFERENCE ) Most important features for lower income groups: Features lst 2nd Total Size of units 0 1 1 Location 6 5 11 Layout and design of units 0 4 4 Low downpayment 7 2 9 Low price 7 7 14 Good recreational facilities 0 1 1 Good playground facilities 0 0 0 Good amenities within the unit 1 - 1 2 (Dishwasher, carpets, etc.) Other 0 0 0 Most important features for higher income groups: Features lst 2nd Total Size of units 3 4 7 Location 17 4 21 Layout and design of units 2 9 11 Low downpayment 0 0 0 Low price 0 0 0 Good recreational facilities 0 0 0 Good playground facilities 0 0 0 Good amemities within the unit 0 4 4 (Dishwasher, carpets, etc.) Other 0 0 0 183. 5.4.5 Condominium Management By Developers One of the more controversial areas in the past was the involvement of developers in the management of their completed projects. Some of the management contracts were alleged to be very long term and lucrative and there are areas where conflict of interest charges may arise if the developer is also the manager. In response to these problems the Strata Titles Act was amended to allow the strata corporation to cancel any management contract on three months notice. In general, the developers surveyed do not appear to be greatly interested in the management of the completed projects. Table 67 reveals that only 8.7% of all firms are still responsible for, and plan to continue the management of their project. Approximately 70% of the firms are no longer responsible and 60% of these managed the project for six months or less. Considering the responses by developer size it appears the larger firms have a greater propensity for continuing to act as managers. Approximately 43% of the small developers are still responsible for management but none plan to continue. One-half of the medium and large developers still responsible for manage ment plan to retain their capacity. One of these firms revealed two reasons for their involvement in management. One was its profitability and the other was the feeling that the long-term viability of the condominium concept depended on the satisfactory operation of the existing projects. They felt that their property management division was best suited to ensure the owners' satisfac tion. The lack of involvement by the small firm probably is a TABLE 67 DEVELOPER INVOLVEMENT IN CONDOMINIUM MANAGEMENT All firms. Large Medium Small Still responsible for management 30.4% (100.0%) 22.2% (100.%) 22.2% (100.0%) 42.9% (100.0%) - plan to relin quish management - plan to continue management 21.7% (71.4%) 8.7% (28.6%) 11.1% (50%) 11.1% (50%) 11.1% (50%) 11.1% (50%) 42.9%. (100.0%) 0 (0%) Not responsible for management 69.6% (100.0%) 78.8% (100.0%) 78.8% (100.0%) 57.1% (100.0%) - duration of ma nagement prior to relinquishing* 0-6 7-12 12 + (60.0%) (20.0%) (20.0%) (33.3%) (33.3%) (33.3%) (100.0%) (0) • (0) (50.0%) (25.0%) (25.0%) Response Rate = 96% •Response Rate =83% 185. reflection of their lesser commitment to the field and a lack of administrative capacity to cope with the management functions. 5.4.6 The Present Situation and Future Expectations In Chapter Two, Section 2.6, the current poor market condition was discussed. It was evidenced by soft prices and a large inven tory of unsold units. These conditions are also reflected in the developers' responses. Approximately 5 3% of the total number of units they had produced since January 1, 1975 were still under their ownership. Of these 56.5% (2004 units) were unsold and vacant and 43.5% (1544 units) were rented. Only 13% of the res pondents did not have any (rented or vacant) units. Table 68 displays the distribution of developers having unsold units. There is a tendancy for the large developers to have a greater number of units vacant or rented than do the smaller firms. Approximately 43% of the small firms do not hold any units. There is also a tendancy of small firms holding unsold units rather than renting. Large firms are the more prevalent in the renting of units and they tend to rent more units than do the smaller firms. There are several reasons explaining the general pattern discussed above. First, many of the firms had recently completed projects prior to the date of the survey (July 1977) and therefore they are likely to be holding vacant and unsold units. Also by definition, large firms have produced more units and are there fore the most likely to be reporting the largest inventories. Secondly, the tendancy of small firms to hold vacant rather than rented units likely stems from their inability, financially, to 186. TABLE 68 DEVELOPERS HAVING UNSOLD UNITS WHICH ARE VACANT Oil RECITED UNSOLD UNITS RENTED OR VACANT VACANT UNSOLD UNITS RENTED UNSOLD UNITS NO.OF UNITS BY DEVELOPER SIZE BY DEVELOPER SIZE BY DEVELOPER SIZE ALL FIRMS LARGE MEDIUM SMALL ALL FIRMS LARGE MEDIUM ' SMA'fJj ALL • FIRMS ' LARGE MEDIUM SMALL 0 13.0% 0.0% 0.0% 42.9% 17.4% 0.0% 12.5% 42.9% 69.6% 62.5% 62.5% 85.7% 1-25 21.7 0.0 37.5 28.6 26.1 12.5 37.5 28.6 13.0 12.5 25.0 0.0 26-50 17.4 0.0 37.5 14.3 17.4 0.0 25.0 28.6 8.7 0.0 12.5 14.3 51-100 21.7 25.0 12.5 14.3 17.4 25.0 25.0 0.0 0.0 0.0 0.0 0.0 101-200 17.4 50.0 0.0 0.0 13.0 37.5 0.0 0.0 4.3 12.5 0.0 0.0 201+ 8.7 25.0 0.0 0.0 8.7 25.0 0.0 0.0 4.3- 12.5 0.0 0.0 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% *ROUNDING ERROR RESPONSE RATE = 92% 187. maintain the excess holding costs of these units for a lengthy period. If one project is not successful in terms of sales, these types of firms may be forced out of business and hence would not appear in the survey. In light of the patterns displayed by firms having unsold units the responses to the question concerning future plans is interesting (Table 69). Approximately 42% of the firms had condo minium projects planned for the future. The large firms were more likely to have projects planned (55.6% versus 37.5% of medium and 28.6% of small firms) and they plan more projects per firm (3.0 versus 2.3 and 1.5 for medium and small firms respectively) than do the other groups. This perhaps is .indicative of the characteristics of condominium development discussed in this chapter. The larger firms, with greater internal financial resources, greater involvement (in terms of corporate activities) and larger overhead expenses which require more continuous activity, are planning future projects. Smaller firms, with smaller cash reserves, a lesser corporate emphasis on condominium development, and greater flexibility in adjusting the level of activity, appear to be awaiting a change in the conditions which currently character ize the condominium market, and housing markets in general. 5.5.1 Condominium Management The Strata Titles Act allows the management of a project to be performed by the strata corporation directly through the strata council or indirectly, through a property management firm. In the latter case the management firm does not acquire the rights, 188. TABLE 69 DEVELOPMENT FIRMS WITH PROJECTS IN THE PLANNING STAGES  (AT THE TIME OF THE SURVEY - JULY, 1977) BY DEVELOPER SIZE ALL FIRMS LARGE MEDIUM SMALL % of Firms with Projects Planned 41.6% 55.6% 37.5% 28.6% Average Number Projects Planned per Firm 2.3 3.0 2.3 1.5 188. TABLE 69 . DEVELOPMENT FIRMS WITH PROJECTS IN THE PLANNING STAGES (AT THE TIME OF THE SURVEY - JULY, 1977) BY DEVELOPER SIZE ALL FIRMS LARGE MEDIUM SMALL % of Firms with Projects Planned 41.6% 55.6% 37.5% 28.6% Average Number Projects Planned per Firm 2.3 3.0 2.3 1.5 189. duties, and powers of the strata corporation but rather acts under the direction of the corporation with the final decisions remaining in their hands. As a portion of this study, a survey of property management firms involved in residential condominium management and of residential strata councils was carried out. The remainder of this chapter presents a discussion of the re sults of this survey, focusing on a presentation of the major problems encountered and the methods of enforcement of the by-laws. 5.5.2 Data Collection and Sample Size The data was collected from questionnaires distributed to condominium management firms and to strata councils. Management firms were identified by listings in classified advertisements in the Yellow Pages of the telephone directories for Vancouver and Victoria and the strata council questionnaires. Strata councils contacted for this latter survey were identified by the Owners' Survey (Chapter 4). Through this process condominium management firms were identified and mailed a Property Managers' Questionnaire. Seven teen management firms responded to the questionnaire- six of which were subsequently interviewed in person. Sixty-four residential strata council questionnaires were completed and returned out of the 120 that were distributed. Respondent management firms reported managing a total of 347 residential projects, (21, 218 units). This represents 50.0% of all residential projects, and 71.9% of all units, in the strata projects which contain 10 or more units in the combined Metro-190. 12 politan Vancouver and Victoria areas. This corresponds to the results of the residential strata council surveys which indicate that 43.8% of the projects were self-managed while 56.3% were managed by professional management firms. The proportion of units represented in the management firm sample did vary between the Vancouver and Victoria areas, although in both areas a large enough sample was obtained to provide reliable results. Twelve firms active in the Vancouver area managed 301 strata projects (19,466 units) representing 55.2% of all projects, and 77.0% of all units, of.the total residential projects containing 10 or more units. In Victoria, five firms -managed 46 projects (34.1%) containing 1,752 units (41.3%). There were also differences in the average size of the professionally managed residential projects between the two metropolitan areas, although professionally managed projects were larger than the average for all projects of 10 or more units in both areas. In Vancouver, the average size of the professionally managed projects was 64 units per project while the overall average for projects of 10 or more units was 46 units. In Victoria the average size of professionally managed residential strata projects was 38 units versus 31 units for all projects of 10 or more units. The larger-than-average size of the profes sionally managed projects reflects the fact that larger projects are more suitable to be managed professionally as economics of scale lower the per unit cost, and the larger size requires more management time than most councils can directly provide. 191. 5.5.3 Management Firms Property management firms engaged in management of residen tial condominium projects display a significant degree of prior experience in real estate and property management, of non-condominium property. Only 18% of respondent managers had no prior experience in these areas; 53% had experience in both pro perty management and other non-management real estate activities, (brokerage, development, etc.), 6% had prior real estate experience in areas other than property management, and 18% had prior pro perty management experience but had not been active in other aspects of real estate. Thus, approximately 70 percent of the condominium property managers have had prior experience in property management. Only 18% of the respondent firms were connected with, companies which were involved in the development of condominium projects. Property management firms also demonstrated a high degree of involvement with their client strata councils. Ninety-four percent send a representative to each general meeting of each project they manage, and seventy percent submit monthly reports to their clients. Each of the six firms that were contacted through a follow-up interview stated that they regularly inspected each project (as often as once a week), and that they invited contact with the strata council whenever problems arose in the project. Ninety-four percent of the property managers were bonded 13 with respect to their responsibilities as property managers. It is the practice that the strata council's accounting records 192. MANAGERS PRIOR EXPERIENCE 193. be kept by the property manager, in 54% of 347 projects, their records were independently audited on a regular basis. Further, some managers required that the projects' records be independently audited immediately prior to the initiation and termination of their management contacts. In a recent article in a local magazine, criticism was 14 levelled at condominium project managers. Yet the results of the survey indicate that the majority of condominium project management firms operate in a professional manner, both in terms of business practice and degree of involvement with the strata corporations. Further, the owner's survey indicated that over three-quarters of the unit owners in projects managed by property management firms were satisfied with the activities of the managers. It would appear that the publicized problems of condominium pro perty managers stem from a minority of cases: in a field as young as condominium management, such problems may be expected in pro jects managed both under contract and directly by strata councils. Perhaps modifications to the Strata Titles Act with respect to management would reduce the incidence of these problems further: however, as councils and managers become more familiar with the management of property occupied by persons who have both the expectations of occupants and of investors - the owner-occupiers -these problems will also be reduced. 5.5.4 Management of Projects a) Budgets: A 1973 study by R.S. Roberts on condominiums in British Columbia indicated that, in the fourteen residential condominiums 194. that were examined, the majority (57%) had current operating expenses which were in excess of the total common area (or 15 maintenance) charges. According to the response in the strata council and project managers surveys carried out in conjunction with this study, the incidence of such deficits is no longer as prevalent: only 8.5% of the projects covered by these surveys had deficiencies between operating expenditures and revenues. This change stems, in all likelihood, from the increased experi ence of both strata councils and property management firms. A greater (although by no means dramatic) incidence of deficiencies occurs in the area of contingency reserves. In approximately 18% of the surveyed projects managed by property managers and by strata councils, the actual size of contingency reserves was below the level that the strata council deemed to be appropriate. In the majority of such cases reported by property managers,* this deficiency was the result of the subject projects being relatively new, and consequently not having yet built the contingency fund to the desired level. Parenthetically, discussion of the adequacy of the actual level of contingency reserves cannot center simply on analysis of this amount vis-a-vis the desired level. The desired level of this reserve is established by the strata council. Consequently, even if the desired level is maintained, it will not necessarily be sufficient to meet the requirements of future repairs and maintenance. Some respondents to the project managers survey indicated that, in their opinion, some strata councils had a *Similar information was not available from the strata council survey. tendency to underestimate the required size of the contingency reserve and, occasionally, the operating budget, in order to reduce the level of monthly owner charges. Again this appears to be a problem which will be minimized with increased experience, b) Major Problems: Both property managers and strata councils which manage their own projects, were asked to rank the problems which were, in their experience, of greatest significance in the management of residential condominiums: the tabulation of these rankings are shown on Tables 70 and 71. From these responses there appears to be two major classes of problems associated with such projects, those which are a function of the degree of interpersonal contact which is associated with the density and physical arrangement of space in condominium projects and those which are associated with the unique, and relatively new, form of tenure represented by condominium ownership. The first category of problems includes the frequently men tioned problems of uncontrolled children and pets, and, less frequently, the level of noise made by other residents. Such problems are, perhaps, to be expected in family owned housing which is built at medium and high densities. While good design and construction may somewhat reduce such problems, the ultimate solution will be in the area of tolerant and responsible behaviour on the part of the occupants. Certainly, these problems are not unique to condominium projects, as many occupants and owners of rental residential and owner-occupied single-detached properties will readily attest. 196. TABLE 70 Ranking_of Most Significant Management Problems  By Management Firms Problems R a n k i n g lst 2nd 3rd Total 1. Uncontrolled Children 3 1 1 5 2. Uncontrolled Pets 4 5 0 9 3. Excessive Noises by Residents 0 1 3 4 4. Breaches of By-Laws 4 1 3 8 5. Educating Owners of Rights and Duties 4 3 1 8 6. Collection of Common Expenses 0 1 2 3 7. Level of Common P^xpenses 0 1 1 2 8. Other 1 2 0 3 197. TABLE 71 Ranking of Most Significant Management  Problems by Strata Councils Problems R a n k i n g s lst 2nd 3rd Total 1. Uncontrolled Children 4 4 2 10 2. Uncontrolled Pets 2 3 3 8 3. Excessive Noise by Residents 1 3 2 6 4. Breaches of By-Laws 2 2 3 7 5. Educating Owners of Rights and Duties 7 2 4 13 6. Collection of Common Expenses 4 3 1 8 7. Level of Common Expenses 1 1 1 3 8. Other ' 5 3 1 9 19 8. One problem area which might be expected on the basis of the owner survey did not appear as a significant problem to self-managing strata corporations nor to property management firms. While both the study by Roberts and the owners' survey carried out in conjunction with this study (Chapter 4) indicated a defin ite bias against tenants in condominium projects on the part of owners, such a bias is not shared by the two respondent groups involved in management of these projects. Only 29% of the pro ject managers and 32% of the respondent strata councils indicated that they had received more than the average number of complaints against tenants. The second category of problems are unique to condominium projects. The 'self-regulating' responsibilities powers of the owners through their strata council is, at . leas t. until familiarity with condominium living is more widespread, bound to create diffi culties. Thus both managers and especially strata councils, experienced significant problems in educating owners in the rights and responsibilities. Further, collection of common area charges was of concern, particularly to strata councils who are most directly involved: note, however, that the level of common area charges was not seen to be of significance by either the council of owners or property managers. Finally, the problem of enforcing by-laws and taking action where breaches of these regulations occurred was of significant concern to both groups of respondents. As this problem actually encompasses both the education and collection problems, it warranted further investigation. 19 9. c) By-law Enforcement: Both self-managing strata councils and property managers were asked to list the order in which appropriate powers were used in the enforcement of by-laws: the results are tabulated on Table 72. Both groups follow essentially the same procedure. The first step is to apply moral suasion in the form of a letter of telephone call advising the offending occupant or owner of the problem and asking that it be corrected. In the majority of cases, respondents reported that this was the only action required to correct the problem. If the contravention of the rules continues,* the strata council exercises its powers under the Strata Titles Act. This will result in either fines being levied or privileges regarding the common.facilities being, suspended. Alternatively, a court order issued under municipal nuisance by-laws may be used to correct the situation, (for example, by having an uncontrolled dog impounded). This latter course is seldom followed, as it creates substantial hard-feelings. If the action to this level has not corrected the problem the next step is to levy further fines, usually in increasing amounts. If the fines are not paid, a lien, in the amount of the outstanding fine plus the administrative fees and land registry costs, may be placed against the title of the strata *If a property management firm is involved, they will contact the strata council for a decision as to the subsequent course of action to be followed. 200 TABLE 72 Ranking of Methods Used to Enforce By-Laws  - Strata Councils Method Ranking 1st 2nd 3rd 4 th Total 1. Moral Suasion 21 2 1 0 24 2. Powers under the Strata Titles Act 4 8 0 0 12 3. Municipal Nuisance By-Laws 0 2 5 0 7 4. Other 1 1 1 1 4 Ranking of. Methods Used to Enforce By-Laws - Management Firms Method Ranking 1st 2nd 3rd 4 th Total ... e— 1. Moral Suasion 14 • 1 0 0 15 2. Powers under the Strata Titles Act 2 12 0 0 14 3. Municipal Nuisance By-Laws 0 0 3 1 4 4. Other 1 0 2 1 4 201 lot. If the fines are still not paid the final step would be to apply for a court sale of the unit to collect the outstanding charges and thus to remove the offending owner. Despite the various means to enforce the by-laws, several managers complained they were not effective or are not pursued beyond the moral suasion level even when the problem is not corrected. Often, by the time strong action is taken to correct the problem, several months had passed and the offence may have occurred repeatedly. This causes significant hardships for othe owners, sometimes resulting in them leaving the project. The enforcement methods per se were not criticized, but rather the relectance on the part of the strata council to exercise these powers. 202 . Footnotes 1. The linking of names of subsidiaries and multiple development firms with the same principals would be possible if a detailed examination of the register of companies was made but time and budget constraints did not make this possible. 2. Identified developers' activities accounted for the following percentages of activity in the province: TOTAL Units Projects Metropolitan Vancouver 99.0% 95.4% Metropolitan Victoria 00.9% 99.3% Rest of Province 77.7% 76.9% 3. Similar difficulty was encountered by Hamilton and Roberts, 197 3, in their attempt to investigate condominium developers. 4. Surveyed developers' activity accounted for the following percentages of activity in the province: TO T A E Units Projects Metropolitan Vancouver 32.9% 13.5% Metropolitan Victoria • 14.7% 5.9% Rest of Province 3.9% 1.1% Total - Province 23.9% 8.6% 5. Chartered banks and trust companies provided 27% and 39% of the funds for all residential mortgage loans in 1976 in British Columbia respectively. Canadian Housing Statistics, Central Mortgage and Housing Corporation, Ottawa, 1976, Table 36, P. 30. 6. Revealed in an informal survey of fifteen lenders and brokers in Metropolitan Vancouver. 7. Goldberg, M.A., and Ulinder, D.D., "Residential Developer Behaviour: 1975", Housing: It's Your Move, Volume II, Technical Reports, The Urban Land Economics Division, Faculty of Commerce and Business Administration, University of British Columbia, 1976. 203. 8. Goldberg, M.A., Residential Developer Behaviour: Some  Empirical Findings, Faculty of Commerce and Business Administration, University of British Columbia. 9. Goldberg, M.A., and Ulinder, D.D., op. cit., P. 295. 10. Goldberg, M.A., op. cit., P. 24. 11. Statutes of British Columbia, 1966, Chapter 46, New S.B.C. 1974, C. 89. Strata Titles Act, Section 10. 12. During the interviews with the management firms it was revealed that the projects managed by the firms were almost exclusively of at least 10 units. It was there fore felt that a comparison on this basis would be the most meaningful. The sample covers 20.5% of all projects and 5 8.9% of all units in the metropolitan areas. 13. Firms that were active in non-condominium property manage ment which involved an agency function with respect to leasing, are required to be licensed under the Real Estate Act, all stated that bonding was a requirement of good business practice. 14. Sagi, Douglas, "Mondo Condo (A Man's Home May be His Hassle.)", Vancouver Magazine, Vol. 10, No. 3, March 1977, pp. 36-39. 15. Roberts, R.S., Condominium Housing in Metropolitan Vancouver, unpublished thesis, University of British Columbia, 1973, p. 86. 204. Chapter Six Condominiums: Unique Features and  Special Considerations 6.1 Taxation of Condominiums Condominiums are generally treated as any other real property for taxation purposes, however some peculiarities do arise. This section will highlight the differences for the real property tax ation and for the income taxation treatment of condominiums. a) Real Property Taxation Under the Assessment Act any real property is assessed at its "actual value" and this value is divided between the land the the improvements (Section 24, Assessment Act). The Act provides for a wide discretion on the determining factors applicable to the "actual value" but in practice it is usually the "fair market value." To separate the actual value into the land and improve ment portions the "land residual approach" is used. This proced ure is no different for condominiums than any other type of real property. The problems concerning condominiums arise from three sources: first, the conversion of existing buildings to strata units, secondly, the treatment of the common facilities of the strata corporations and finally, the level of service that is received for the taxes paid. Upon conversion of an existing building to a strata project a re-assessment is performed under Subsection 24 (6) (b) (iii) of the Assessment Act. This includes buildings that existed at the time of the assessment "freeze" which fixed the assessed value as 205. that of the 1974 assessment roll. The re-assessment is signifi cant because it will increase the tax liability for two reasons. Firstly, the value now will likely be greater than that on the 1974 rolls. This factor will soon be eliminated when the current value rolls are put into use. Secondly, but more importantly, the unit value of the strata lot will be greater than its value in leasehold and hence the tax will be increased. This results without any increase in the level of services provided by the tax dollars. A similar situation.exists where a strata project is being rented. The assessed value is still calculated on the basis of the unit's condominium value, not their rental value. Generally, the taxation will therefore be greater than if it had been built under a singlex title for rental purposes. The units' share in the common areas is included in the value of strata lot by virtue of Section 33 of the Strata Titles Act. This means the expected sale price or fair market value of the units may be used without any adjustment necessary to reflect the units' share of the common areas. This is implicitly included in the value determined. There are however, strata projects where the ammenities do not form part of common areas. They may be a separate strata lot, or a separate piece of property which the strata corporation has purchased. For example, Strata Plan VR 120, Arbutus Village, the recreational centre is located in an adjacent building and is leased to the strata corporation."'" The lease payments include a share of the real property taxes. 206. As the centre is not part of the strata project, it is taxed separately. In theory, this will not cause any inequality in the level of taxation because if the recreational centre were part of the project, it would be capitalized into the value of the strata lots, therefore increasing their value and hence, taxes. In practice, the market may or may not recognize the differences in the level of common area charges, property taxes, and value of the assets of the strata corporation and adjust the price accordingly. The final problem facing condominiums is the equating of service with the level of taxes to produce a "fair" return in relation to other types of property. It has already been shown that the conversion of an existing building to a strata project can result in higher taxes without any improvement in the level of services provided. In the eyes of the taxing authorities, no inequality exists as all real property is assessed on the basis of its actual value. An additional problem occurs in instances of strata develop ments that have extensive roadways within their boundaries, par ticularly, bareland, support structures, single detached or townhouse projects. First, all the common facilities including the roadways, sewer pipe and water pipe are installed by the developer and presumably the costs are included in the price of the units. Secondly, within the project, some municipalities will not provide the same services as to those properties frontin on municipal roads. For example, snow removal and garbage collec tion within the project may be left to the strata corporation to 207. provide. The strata lot owners are therefore paying taxes on the same basis as other property owners but are receiving a lower quality of service. b) Income Tax - Owners Condominiums are treated in the same manner as single family detached dwellings for the purposes of classifying them as princi ple residences. The unit's share in the common property is inclu ded as part of the condominium and hence receives the same treat ment. One point that should be noted for those that intend to purchase a unit that will be rented until a later date when the owners will occupy the unit. At the date the unit ceases to be rental and becomes owner occupied a change in use occurs. When this happens there is a deemed sale and repurchase at fair market value and a capital gains tax liability may result. c) Income Tax - Investors Condominiums have facilitated the involvement of small investors in the real estate market by allowing portions of building to be purchased rather than the entire project. The demand has been accelerated by the rapidly rising prices of real estate in the 1970's, the exemption of new rental units from the rent restrictions under the Landlord and Tenant Act, and the provision for deducting rental losses from other income for Class 31 arid 32 buildings. Developers have also been forced into the investor category in some cases, as a result of the slow absorption rate causing the units to be rented. The rules apply ing to investors in general will be examined, then the developers' 208 * situation will be considered. The first point to note is that where the property is held by an individual, the income received is classified as "passive income" unless extensive services are provided in connection with the property. Passive income is "taxed immediately at the high rate of 46% plus the excess of the provincial rate over 2 10%." Similarly, if the property is held by a corporation, the income derived will be classified as business income but not necessarily active business income unless extensive services are again provided. Only active business income qualifies for the small business deduction which provides for the reduced tax rate of 21% on the first $100,000 of income. The onerous taxation of rental income does not deter invest ment as much of the revenue is written-off against the capital cost allowance claimed. Of particular importance is the provision for classifying multiple-unit residential buildings constructed between November 18, 1974 and January 1, 1976 as Class 31 and 32 depreciable properties. Such a classification allows taxable losses, created by the capital cost allowance claimed in excess of net income, to be deducted from other income. This does not apply to any other taxation classes of real property except where they are held by a real estate corporation or a real estate part nership. Condominiums posed a small complication as to whether they constituted a "multiple family residnetial building" especially where only one was owned. Interpretation Bulletin IT-304 clari fied the situation by stating that each unit is classified as the building itself would be classified if it were not divided 209. into strata lots. Further where two or more units in the same building are owned by the same taxpayer they are classified as a single building with a single capital cost. If a portion of the taxpayer's holdings are sold his adjusted cost base and consequently his capital cost is apportioned between the part disposed of and the part retained for determining his capital gain, recapture, or terminal loss. Condominiums built on leased land can be categorized for depreciation purposes under several classes. Where an owner acquires the unit after 1975 the building portion of the purchase price is classified as Class 3 or 6. Where the building qualifies under Class 31 or 32 the unit is treated in the same manner. In any other case the capital cost is depreciated under Class 13 which is the normal treatment of buildings situated on leased lands. For the purpose of determining the capital cost allowance an allocation between the land and building must be made. Paragraphs 4 and 5 of Interpretation Bulletin IT-304 apply and have been quoted in full. "For capital cost allowance purposes, where a unit or strata lot includes land, the usual allocation of cost between land and building is required to be made. This might arise, for example, where a ground floor apartment includes an outdoor patio, or where a row-type condominium unit includes a front or back yard which is not p.art of the common property." "Where a unit or strata lot is purchased, the purchaser acquires an undivided interest in the common elements or property appurtenant to such unit or lot. To the extent that the common elements or property include land, allocation of cost between the undivided interest in such land and the interest in the building or buildings is also required to be made. The cost of acquisition of the undivided interest in the common areas of the building or buildings included within the description or plan, or the owner's proportionate share of any capital expenditures made thereon, forms part of the capital cost of the building portion of his unit or lot." 210. Developers who are forced or choose to rent condominiums that were originally intended for sale face two special problems. Firstly, a taxpayer's inventory is not eligible for the deduction of capital cost allowances according to Regulation 1102 (1) (b) of the federal Income Tax Act. However, "Interpretation Bulletin IT-128 states that a taxpayer will normally be allowed to treat income producing property for tax purposes in the same manner as he handles his accounting That is, capital cost allowance will be deductable on conversion to capital property. Interpretation Bulletin IT-102 deals with the converstion of inventory to or from capital property, in neither case is there a deemed disposition. Where the conversion is from inventory to capital property the original capital cost is equal to all the outlays that are reasonably attributed to the property other than those currently deductable. However, these costs are limited to those actually incurred and do not include a provision for profit Where the conversion is reversed, capital property becoming inventory, the fair market value at the date of conversion will be the cost of inventory for the purpose of the trading profit. However "in calculating the gain or loss on the disposition of the property under subsection 40(1) (definition of taxpayer's capital gain or loss) the adjusted cost base. . . is based on the original actual cost of the property and not its fair market value at the date of conversion. To the extent that the gain or loss as calculated under subsection 40(1) has been included in computing the business income of the taxpayer, the amount so included reduces the capital gain or on the disposition pursuant to subsection 39(1) (defini tion of the meaning of capital gain)."4 211. The second problem that faces the developer is whether the income received from the rentals is classified as active business income, and hence eligible for the small business deduction, or whether it is merely business income. Normally corporations which derive income from developing and selling real estate are carrying on an active business and have active business income; rental income is not active business income however.. According to the ruling handed down in the Granite Apartment Ltd. v MNR, 75 DTC 14 0, "...rental income earned on property held for a short period of time (is) active income because the pattern of the taxpayer's activities indicated that his business consisted of developing and selling real estate. Furthermore, Interpretation Bulletin IT-72R2 indicates that a developer need not be particularly active in each taxation year in order to be regarded as having earned active income. The end result is that the rental income will likely be classified as active business income so long as it does not persist for greater than a "short period," probably one taxation year. If the renting continues the income may lose its "active" designation and the taxpayer will face a reassessment for the previous year. 0 d) Income Tax - Developers The taxation of condominium developments is the same as that for any other property type. It can be complicated however, in cases of phased developments where extraordinary costs are incurred in one phase but will benefit all phases. If the costs are allo cated only to the one stage it will result in a lower income in those years and higher incomes in the years of the other phases. 212. The high incomes may exceed the $100,000 limit applicable to the small business deduction which would result in a greater tax being paid. The federal Income Tax Act or any Interpretation Bulletin deals with this situation but a study suggested: "That a portion of the cost which benefits the later phases of the development should be allocated to those . . phases that will eventually receive the benefits therefrom" If this were done and the later phases were not constructed or there were cost overruns a re-assessment would have to be made. Similarly, if the common facilities were constructed in the later phases an allocation would be made to the initial phases any devi ations adjusted for by the re-assessment of the previous year(s) taxes. 6'. 2 Conversion of Rental Apartments tor Condominiums' During 197 3 a significant controversy arose as some rental apartments were converted to condominiums. This was at a time of a severe shortage of rental apartments (0.4% vacancy in Van couver, 0.3% in Victoria) and therefore caused significant prob lems for those displaced by such action. In response, the pro vincial government ammended the Strata Titles Act to require the approval of the municipal council before such a conversion could 7 take place. The Landlord and Tenant Act was also changed to require four months notice to the existing tenant and the payment of relocation expenses to a maximum of $300. These legislative changes made subsequent conversions significantly more difficult. The only record of the number of conversions are those main tained by the municipalities involved. Table 73 represents the number of plans and units authorized by the municipalities" in each year. Those municipalities that are not represented have not approved any conversions or did not have the records avail able. The impact of the requirement of municipal approval has been a major obstacle to conversions. Several municipalities (Burnaby and New Westminster) reported to have established a moretorium on conversions while Victoria will not allow any conversions so long as the apartment vacancy rate remains below 3%. Overall only 10 projects (225 units) have been converted after the requirement for municipal approval was instigated (1974-76) versus 38 (963 units) from 1971-73. The number of conversions of rental apartments to condomin iums should remain very limited in the future. This is a result of continued government restrictions, the current oversupply of new condominiums, and the proposed removal of rental increase restrictions under the Landlord and Tenant Act (Bill 87, 1977). The latter two conditions will bring the relative economic values of rental apartments and condominiums closer together and hence remove much of the stimulus for conversion. Where the economic rational for conversion has not been eliminated, the governmental restrictions will likely thwart any conversion attempt. 6.3 Support Structures Support structures are condominium projects where the units consist of an area of land rather than a part of building. By virtue of subsection 3(4)(6) of the Strata Titles Act the boun daries as laid out on the horizontal plan are deemed to extend vertically upward and downward without limit. The most common TABLE 73 . CONVERSIONS TO CONDOMINIUMS: BRITISH COLUMBIA Land Registry Areas .1971 1972 1973 1974 1975 1976 1977 Total Pro- Unit ject Pro- Unit ject Pro- Unit ject Pro- Unit ject ... Unit ject Pro~ n -i. • Unit ject Pro" r, -4. Unit ject Prc~ r, Unit ject 1. Metropolitan Vancouver LRO 2. Balance Vancouver LRO 3. Total Vancouver LRO 7 0 7 119 0 119 14 0 14 305 0 305 6 0 6 114 0 114 3 0 3 51 0 51 4 0 4 63 0 63 2 0 2 109 0 109 1 0 1 2 0 2 37 0 763-0 4. Metropolitan New West minster LRO 5. Balance New Westmin ster LRO 6. Total New Westminster LRO 0 0 0 0 0 0 1 0 1 19 0 19 2 0 2 49 0 49 0 0 0 0 0 0 0 0 0 0 0 0 Xti— 3 0 3 Pxi 68 0 68 7. Total Metropolitan Van couver Area (1+4) 7 119 15 324 8 163 3 51 2 109 1 2 40 831 8. Metropolitan Victoria LRO 9. Balance Victoria LRO 10. Total Victoria LRO 3 0 3 136 0 136 5 0 5 221 0 221 8 0 .8 357 0 357 11. All Metropolitan Areas (1+4+8) . 7 119 18 460 13 384 . 3 51 . 4 63 2 109 . 1 2 48 1.188 12. Kamloops City 13. Kelowna 14. Vernon 15. Penticton 16. Balance Kamloops LRO 17. Total Kamloops LRO • 18. Nelson LRO 19. Prince George LRO 20. Prince Rupert LRO 21. Grand Total: B.C. 7 119 18 460 13 384 3 51 4 63 2 109 1 2 48 . 1188 215. usage of this type of development is in mobile home parks where the trailer pads are sold as separate units and the roadways and other common facilities are owned in common. In total it is estimated there are 52 bare-land strata plans in the province comprising 1509 units. Prior to Bill 70 (Strata Titles Amendment Act, 1977) which will be retroactive to June 24, 1977, a strata plan supplying only support structures did not require the approval of the designated approving officer in the area before registration. This resulted because the section of the Act that required the approvals be received (sections 4 and 5) referred only to new buildings, phased strata plans, or the conversion of the exist ing buildings. The loophole allowed some developers to "circum-g vent municipal planning departments" and regional building restrictions by creating subdivisions under the Strata Titles Act. Bill 70 eliminates this possibility by specifically requiring approval of the support structure plan prior to regist ration. Table 74 shows the distribution of support structures by area and year. Only 13.4% of the projects and 3.2% of the units are located in the major metropolitan areas. These are also small developments averaging 6.8 units per project versus 29.0 for the province. The Kamloops Land Registry Office contained more support structure condominiums than any other area, rep resenting 42% of the plans and 36% of the units in the province. In order to provide some insight into the use of the condominium concept in support structure projects the documents TABLE 74 SUPPORT STRUCTURE CXMX3MINIUMS IN BRITISH COLUMBIA Land Registry Areas 1975 Project Units 1976 Project Units 1977 Project Units Total Project Units % Project Units 1. Metropolitan Vancouver LRO 3 31 2 9 5 40 2. Balance Vancouver LRO 2 112 7 200 9 312 3. Total Vancouver LRO 5 143 9 209 14 352 4. Metropolitan New Westminster LRO 0 0 0 0 0 0 5. Balance New Westminster LRO 1 157 0 0 1 157 6. Total New Westminster LRO 1 157 0 0 1 157 7. Total Metropolitan Vancouver Area (1+4) 3 31 2 9 5 40 8. Metropolitan Victoria LRO 0 o •- 2 8 2 8 9. Balance Victoria LRO 4 195 7 760 11 271 10. Total Victoria LRO 4 195 9 840 13 279 11. All Metropolitan Areas (1+4+8) 3 31 4 17 7 48 12. Kamloops City 0 0 0 0 0 0 0 0 13. Kelowna 0 0 2 6 0 0 2 6 14. Vernon 0 0 0 0 1 15 1 15 15. Penticton 14 0 0 0 0 1 4 16. Balance Kamloops LRO 1 20 8 177 9 320 18 517 17. Total Kamloops LRO 2 24 10 183 10 335 22 542 ' 18. Nelson LRO 0 0 0 0 19. Prince George LRO 1 79 1 79 20. Prince Rupert LRO 1 100 1 100 21. Grand Total B.C. 2 24 20 678 30 807 52 1509 of a large strata mobile home park were examined. The only unusual aspects of the by-laws were amendments which restricted the size of mobile homes (450 square feet), the minimum length of mobile homes (11 feet), a minimum construction standard (equiva lent to the National Building Code or standard prefabrication) and a setback requirement. 6•4 Non-Residential Condominiums Non-residential condominiums are registered and operated in the same manner as residential projects - only the use of the property is different. The Land Registry Offices do not separate non-residential strata plans from the others nor do they index them in their catalogues. The only means of identifying the use is the examination of each set of strata plans. Since it is j^otr^ not always possible to determine the use from the plans, the number of non-residential projects identified must be taken as a minimum rather than a precise count, the margin of error how ever, would appear to be very low. The completely non-residential projects are shown in Table 75. There were also identified 5 projects involving 49 units which were partially non-residential, all of which were located in the City of Vancouver. Of those projects which were strictly non-residential, 31 were warehouses and 11 were commercial. The first strictly non-residential plan registered in the province 3 was in May, 1971 in Kelowns (Kamloops Land Registry Office), consisting of 3 units. The first one registered in Victoria was in December 1972 and it was not until February 1975 that one was TABLE 75 COMPLETELY NON-RESIDENTIAL CONDOMINIUM PROJECTS IN BRITISH COLUMBIA jar.d Registry Areas 1971 Project Units 1972 Project Units 1973 Project Units 1974 Project Units 1975 Project Units 1976 Project Units 1977 Project Units Total . Project Units 1. Metropolitan Vancouver LRO 2. Balance Vancouver LRO 3. Total Vancouver LRO 1 i 2 11 0 0 2 11 1 4 0 0 1 4 i 5 34 1 1 6 35 8 49 1 1 9 50 4. Metropolitan New West minster LRO 5. Balance New Westmin ster LRO | 6. Total New Westminsterl LRO 1 2 8 0 0 2 8 5 63 0 0 5 63 3 17 0 ;j 0 3 : 17 I 13 116 1 22 14 138 23 204 1 22 24 226 7. Total Metropolitan Van couver Area (1+4) i 2 11 3 12 5 63 3i7 18 150 31 253 8. Metropolitan Victoria LRO , 9. Dalancn Victoria LRO J LO. Total Victoria LRO | 1 4 0 0 1 4 2 11 0 0 2 11 4 1 ' :. 2; 0 : 0: 1 ;. 2 3 19 0 0 3 19 7 36 0 0 7 36 ! LI. All Metropolitan Areas' (1+ 4-t-8) 1 4 4 22 3 12 5 63 4 .' 19, 21 169 38 289 -.2. Kamloops City L3. Kclov/na .4. Vernon L5. Penticton Jj. Balance Kamloops LRO L7. Total Kamloops LRO 0 0 1 3 1 3 0 0 1 7 0 0 0 0 0 0 1 7 0 0 2 10 0 0 0 0 0 0 2 10 15. Molson LRO 19. Prince George LRO JO. Prince Rupert LRO I-• JI. Grand Total: B..C. 2 7 0 0 4 22 3 12 5 63 4 19 24 199 42 322 219. registered in the Lower Mainland. The majority (90%) of the strictly non-residential projects are located in the major metropolitan areas. The development of condominium warehouses in any major way 9 has been restricted by financing difficulties until recently. Initially, institutional lenders would grant a maximum loan value of 75% of the units rental value which was only equal to 50-60% o the condominium value. Consequently the purchaser required a substantial downpayment or secondary financing to purchase the unit, neither of which was completely acceptable. Eventually the Mortgage Insurance Company of Canada (M.I.C.C.) was convinced to insure the loans to 75% of the condominium sale value which en abled adequate financing to be arranged. The economic viability for industrial or commercial condo minium will naturally depend on the particular market being con sidered. There are however several general advantages and dis advantages to the purchaser that are often cited. The positive aspects are: (1) for users of small spaces there are considerable economies of scale by being in a large development than in having a single small building, (2) the deduction of capital cost allowance and mortgage interest payments from taxable income can provide greater tax benefit than the deduction of the lease payment alone would provide, (3) ownership eliminates the possibility of rent increases, (4) the required return on the investment for the self-owner may be less than that required by an investor, (5) there is potential appreciation in capital value, (6) there is a greater security of tenure in ownership, 220. (7) the accumulation of equity as the mortgage is repaid, (8) for industrial users there is often a shortage of small but functionally efficient space which the new units can provide.10 The major disadvantages are: (1) the need for a 10-20% downpayment, (2) to date there has been a need for the same or even greater cash-flow to service the mortgage as the lease payments, (3) there is yet an unknown resale market which may cause: (i) capital depreciation, (ii) less flexibility for expansion or contraction than under leasing, (4) the generally high loan to value ratio will be included on the balance sheet of the firm which may affect the borrowing capacity of the company. From the developers' point of view he has the advantages of being able to recoup his investment more quickly and obtaining a higher (usually) selling price in a condominium development than under a rental arrangement. The disadvantages are the loss of any potential capital appreciation and increased rental revenue over the holding period if the project is retained. Through the developers' survey a firm that had constructed several condominium warehouse projects was contacted."'"'*' In an interview they revealed the majority of their projects and others similar to them, were located in the suburban areas of Vancouver. The units contained from 1800 to 2400 square feet and are designed for small suppliers or contractors needing only a limited amount of space for storage, workshop, and an office. One of the projects was selected for an analysis of the cost of ownership relative to leasing. The figures used were supplied by the development firm and reflect the current market conditions, the analysis is presented in Exhibit 2. The sample unit contained 1800 square feet and was offered for lease at $495 per month or could be purchased for $69,900. Eighty-five percent mortgage financing is provided at the existing market rates and terms (11%, 25 year amortization period). Overall there did not appear to be any economic advantages to purchasing rather than renting a unit. There is only an $0.08 per square foot advantage to purchasing in the first year at the 46% taxation rate (full corporate taxation rate). At^the 25% tax rate (applicable to those qualifying for the small business deduc-tion), the situation is reversed with leasing, showing a $0.32 per square foot advantage. In subsequent years the purchase option will become more expensive as the tax benefit is reduced due to the declining mortgage interest expense and capital cost allowance. Under the lease option there is a potential for increasing rental costs on the expiration of the initial term. It appears those that have purchased a unit have placed a positive value on the intangible aspects of purchasing, discussed previously, as there is not an economic advantage initially. A realty firm which deals exclusively with the leasing and selling of warehouses was interviewed in conjunction with the 12 developer. They stated the overall capitalization rate for an owner-occupier was about 9% while an investor in a similar unit would require 11-12%. In relation to the sample unit this EXHIBIT 2 222. Comparison of the Leasing and Purchasing Cost of a Warehouse Condominium LEASE 46% Tax Bracket $495 per month x 12 months = 46% Tax Bracket (.46 x 5940) Net After Tax Cost• $5940 2732.4 $3207.6 Cost per Square Foot $1,782 25% Tax Bracket (Applicable to those qualifying for the Small Business Deduction under the Federal Income Tax Act) $495 per month x 12 months ' $5940 25% Tax Bracket (.25 x 5940) 1485 Net After Tax Cost 445Cost per Square Foot $2,47PURCHASE Price $69,900 15% Downpayment 10;, 485 say $10,500 85% Financed at 11%, 25 year amortization (59,400) Monthly Payment 9.6253 / month / 10,000 = 571.74 say $572 / month Yearly Payment 572 x 12 = $6864 Yearly Mortgage Payment $6864 Tax Benefit (Year 1) Interest Expense (.11 x 59,400) = 6534 CCA. (5% on 45,000) = 2250 Total Deducation 8784 46% Tax Bracket Tax Benefit (.46 x 8652) (3980) Opportunity cost of Downpayment (.09 x 10,500) (1-.46) 510 Net cost before Principle Reduction 3394 Less Principle Reduction ' 330 Net Cost after Principle Reducation 3064 Cost per Square Foot $1,702 Cost per Square Foot Excluding Principle Reduction $1,886 25% Tax Bracket Yearly Mortgage Payment Tax Benefit .25 x 8784 Opportunity cost of Downpayment (.09 x 10,500) (1-.75) Net Cost before Principle Reduction Less Principle Reduction Net Cost after Principle Reduction Cost per Square Foot Cost per Square Foot Excluding Principle Reduction Summary - Cost per Square Foot Lease Purchase* Difference 46% Tax Bracket $1.78 $1.70 $0.08 25% Tax Bracket $2.48 $2.80 -$0.32 $6864 (2196) 709 5377 330 5047 $2,804 *Cost per Square Foot after Principle Reduction 224. means the value as a condominium is about $70,000 and the value 13 as an investment is from $52,500 to $57,300. There is therefore an advantage of 18-25% in the value of a condominium warehouse over the more traditional forms. Three hundred thousand square feet of condominium warehouse space had been sold by the realty firm since February, 1975. Another 500,000 square feet is reported to be in the planning stages and is expected to come on the market in the next 12 to 18 months. The rate of absorption of new units has been declining recently however, indicating that a substantial oversupply may result if the planned projects are developed as expected. 6.5 Common Area Charges Common area charges are levies by the strata corporation on each unit in order to pay the maintenance and upkeep expenses of the common areas. The amount of the charges per unit is based on proportionate share, as defined by the unit entitlement, of the total expenses. Two areas concerning the common area charges were examined. Firstly, the average unit charges and their rate of increase were tabulated and secondly, the reported underestima ting of charges by the developers. It should be noted that the cornmon area changes can vary significantly from one project to another depending upon the amount and type of amenities and upon the physical arrangements of the building. For example, one would expect the common areas to be higher for projects with numerous amenities and extensive common areas such as swimming pools, health spa's, and covered 225. parking. What is less obvious is that common area changes may also vary, for two otherwise identical projects, because of the physical arrangements for services such as heating and air-conditioning. In one case the heating and air-conditioning may be a central service (common area charge) while in another it may form part of the direct charges (electrical) to the owners. Due to the potential variations in amenities and arrangements for services, it becomes extremely difficult to generalize with respect to common area charges. Therefore the data provided in the following tables should be used with extreme caution. During the Owners' Survey (Chapter Four) the respondents were asked to state their current monthly common area charges, these are presented in Table 76. Approximately one half (51.5%) of the charges are less than $51 per month, only 6.7% are over $80 per month. The highest average charge is found in the high-rise units followed by low-rise, townhouse, and finally in those projects containing a mix of structure types. In 81.2% of the units, the common area charges per month exceeded the monthly equivalent of the real property tax, thereby representing the second largest cost per month after mortgage payments. In order to estimate the rate of increase of common area charges the res pondents to the owners' survey were asked the level of common area charges when they first purchased the unit. This combined with the current level and the date of purchase allowed the rate of increase to be calculated. The average annual compound rate of increase was found to be 12.7% from 1972 to 1977. By comparison, TABLE 76 Percentage Distribution of 1977 Common Area Charges by Structure Type (Metropolitan Vancouver and Victoria) STRUCTURE CHARGES TOWN LOW HIGH PER MONTH HOUSE RISE RISE MIXED TOTAL $ 0 - 30 2.0% 1.0% 3.6% 1.6% 8.3% 31-40 6.8 1.0 2.6 * 10.9 41 - 50 15.1 8.2 5.7 3.1 32.3 51 - 60 4.7 9.4 3.1 2.0 19.3 61-80 2.6 12.5 7.3 0 22.4 81 -100 0 * 4.1 0 4.7 100 or more 0 : • • 1.0 •• 1.0 & - 2.0 %Total Sample 33% "3. 3 5- 27% 7% 100% Average % $50 $58 $67 $45 $57 *Less than one percent. Source: Survey of 20 2 condominium owners randomly selected in the Metropolitan Vancouver and Victoria areas. the average weekly earnings as measured by the industrial compo-site index increased by approximately 12 percent per annum dur ing the same five years. In the past accusations have been leveled against developers that had allegedly underestimated the common area expenses in 14 order to attract people into purchasing. The 1974 amendments to the Strata Titles Act included changes to correct this practice. The developers were required to prepare an interim budget for the operation of the project and were responsible for all the excess of the actual cost over the estimated. To investigate the extent of this problem the respondents to the owners' questionnaire were requested to state the estimated charges prior to occupation and the actual levies after having moved in. Sixty-eight percent of the responses noted no difference between the actual and estimated charges. Of those that were underestimated (actual charges exceeding estimated), 12% were done so by $1 to $5 and 18.3% by over $5, only three responses indicated the charges were overestimated. Analyzing those that were underestimated by more than $5 reveals that they represent exactly the same proportion of the sales after the legislative amendments (1975-1977) as they did over the three years prior to the amendments (1972-1974) , 18.2%. It can therefore be con cluded the legal requirements are ineffective in reducing the underestimation of common area charges. However, given that this occurs in less than 20% of the units, it does not appear to be a serious problem. 228. 6.6 Government Involvement in Condominium Financing a) Federal Government During the introductory stages of the condominium concept the extent of government involvement was substantial. From 1967 to 1970 approximately 50% of the total dollar amount of condomin ium first mortgages in Canada were supplied directly by a 15 government agency. Further, virtually all the loans made by conventional lenders were insured under the National Housing Act (N.H.A.). "The majority of the lending institutions stated that they would not provide any financing for condominiums unless the loans were insured under the National Housing Act."I6 As the condominium market matured and lenders became more familiar with the concept the heavy reliance on the government was reduced. In the 1971 study, 85% of the condominium units in Metropolitan Vancouver were insured under N.H.A. or financed 17 directly from CM.H.C, this figure was reduced to 60% in 1973 Overall, from 196 7 to 1976, 36.2% of the condominiums in Metro politan Vancouver and 29.4% of those in Metropolitan Victoria were financed directly by CM.H.C. or the loans insured under N.H.A. The breakdown is shown in Table 77. Clearly the level of government involvement has been reduced substancially through time. In British Columbia from 1967-1976, 11,230 N.H.A. mortgage 19 loans were approved on new condominium units. This represents 30.5% of all newly created units in the province. One would TABLE 7 7 N.H.A. and CM.H.C. INVOLVEMENT IN CONDOMINIUM FINANCING (1967 TO 1976) N.H .A. 1 C.M.H.C^" TOTAL 2 INSURED DIRECT CONDOMINIUM REGISTRATIONS NO. Q. ~o NO. % NO. % 1967-1975 VANCOUVER 6141 32.1 1003 5.3 19104 100 VICTORIA 552 15.9 147 4.2 3470 100 1976 VANCOUVER 2232 32. 8 - 0.0 6812 100 VICTORIA 640 59.6 — 0.0 1073 100 1967-1976 TOTAL VANCOUVER , 3373 32.3 ... 10,0 3 . 3.9 25916 ,100 VICTORIA 1192 26.2 147 • 3.2 4543 100 TOTAL 9563 31.4 1150 3.8 30459 100.0 SOURCE: 1. CENTRAL MORTGAGE AND HOUSING CORPORATION, CANADIAN HOUSING STATISTICS, OTTAWA, 1976, P. 65. 2. TABLE 1. 230. expect the involvement of the government to be greater in the the outlying areas and less in the major metropolitan regions due to the difficulty in attracting private funds. In comparing the figures presented here this hypothesis is not substanciated. Considering only 1976 there were 3553 N.H.A. loans approved on new condominium units. Ninety-one of these were direct loans from C.M.H.C. and the balance were from approved lenders. This represented an increase over the previous years as these units represented 36.0% of all units registered in British Columbia in that year. The general increase in the involvement of C.M.H.C. in condominium financing in 1976 is likely due to the soft mar ket conditions that were being experienced and therefore lenders requiring the extra security offered through the insurance pro gramme. Furthermore, there was a shift in the composition of the financing with a significant reduction in the direct lending of C.M.H.C. From 1967-1975, 3144 direct lajons or 29% were made by C.M.H.C. while the 91 direct loans in 1976 represent less than 3% of the loans made under the N.H.A. The Assisted Home Ownership Program (A.H.O.P.) has become an important factor in the condominium market of late. The pro gram is designed to encourage the production of moderate cost housing by providing assistance to the purchaser. Loans of up to 95% of value at low interest rates are available plus a sub sidy of $750 per year from the federal governemnt, and a further $750 from the provincial government if the debt service ratio is greater than 25%. The maximum sale price for the unit to qualify under the program is $47,000 in Vancouver and $45,000 in Victoria 231. which is with the economically profitable range for the production of most condominiums. In 1976, 2418 units were approved under A. H.O.P. in Metropolitan Vancouver, one thousand, one hundred and fifteen were single family detached dwellings and 1186 were row or apartment condominiums. ~* These condominiums represented approximately one-sixth of the units registered in that year. b) B.C. Government Second Mortgages The B.C. government provides grants of $1,000 or a second mortgage of $5,000 on new units or a $500 grant or $2,500 second mortgage on existing units to purchasers who have not previously owned a home. The earlier studies both reported high percentages of purchasers using the second mortgages (60.9% in 1971 and 61.5% in 1973), however these represent only the N.H.A. insured purchases. Including the low-cost units and the conventionally financed units this percentage is reduced to 47.6% in the 197 3 study.^ The statistics recorded in this study show a reduction in the use of the second mortgages from those previously recorded. Considering only the N.H.A. insured purchases, 46% used a B. C. government second mortgage, a decline of 15% from the 197 3 study. Thirty percent of all purchasers used a B.C. government second mortgage while 3% used a second mortgage from an alternate source, again a decline of 15%. Removing the purchases made for all cash the proportions increase to 37% and 4% respectively. It is difficult to explain why there was a reduction in the use of the second mortgages. Only a small part of it can be attributed to an increase in the number of prior owners which are 232. ineligible for the assistance (32% in 1973, 36.5% now). Unfor tunately information was not collected on the use of the grant which may have accounted for the difference. Footnotes 1. Brief to the Commission of Inquiry On Property Assessment  and Taxation, Council of Strata Corporation VR 120, Arbutus Village, December, 1975. 2. Truster, Perry, and Rosewig, Michael, Income Taxation in  the Real Estate Industry, Canadian Institute of Chartered Accountants, 1975, pp. 4-01. 3. Beach, Donald J., Tax Guide for the Real Estate Industry, A Handbook for the Canadian Real Estate Association, Methuen, Toronto, 1975, p. 65. 4. Interpretation Bulletin, IT-102. 5. Truster and Rosewig, op. cit., p. 40-6,. 6. Ibid., pp. 6^05. 7. Statutes of British Columbia, 1966, C. 46, Now S.B.C., 1974 c. 89, Section 8. "Strata Title Rules to be Tightened", The Columbian, New Westminster, July 29, 1977. 9. Based on an interview with P. Day, President of Coranodo Mortgage Corporation. 10. Melaniphy, John C. Jr., Commercial and Industrial Condo miniums , The Urban Land Institute, Washington, D.C, 1976, p. 8. 11. Technics Development Corporation. 12. Town Group Realty, John Mclntyre. 13. Market rental of $3.50 per square foot = $6300 per year $6300 ^ .09 = $70,000 $6300 T .11 = $57,300 $6300 4 .12 = $52,300 14. Sagi, Douglas, "Mondo Condo (A Man's Home May be His Hassle)", Vancouver Magazine, Vol. 10, No. 3, March 1977, p. 37. 234. 15. Forty percent was supplied by the Ontario Housing Corpora tion and 12% by the Central Mortgage and Housing Corpora tion. Condominium Research Associates, National Survey of Condominium Lenders, Condominium Research Associates Toronto, 1970, Table IV. 16. Ibid, p. 46. 17. Hamilton, S.W., Davis, I., and Lowden, J., Condominium Development in Metropolitan Vancouver, The Real Estate Council of British Columbia, Vancouver, 1971, pp. 14-15. 18. Hamilton, S.W. and Roberts, R.S., Condominium Development  and Ownership, Real Estate Board of Greater Vancouver, Vancouver, 1973, p. 19. 19. Statistics quoted in this section from: Canadian Housing  Statistics, 1976, Central Mortgage and Housing Corporation, Ottawa, 1976, p. 64. 235. Chapter Seven Summary and Conclusions This study comprises an extensive amount of information on the condominium market and its participants. It would be impos sible to condense all the findings into a few pages but a summary of major points is provided. Also, it is noted that the vast quantity of primary data has not been analysed to its fullest o and therefore some suggestions for future research are included. The condominium market has grown significantly since its introduction in 196 8. In that year only 7 plans involving 312 units were developed while in 1976, 667 plans involving 11,052 units were registered. As of November 30, 1977, 46,411 units in 2 340 plans existed" in British Columbia. The growth in the number of condominiums was accompanied by an increasing impor tance in terms of their representation in the housing market. By 1976, condominium developments accounted for 26 percent of all housing starts in the province and 58 percent of all multiple unit starts. As the condominium experience increased and mortgage lenders, developers and the public in general became more accustomed to the concept, a greater variety of projects was developed. This was particularly true after 197 3 as commercial, industrial, mixed commercial and residential, bareland, and support structure strata projects became more common. Other innovative uses of the concept will likely appear in the future. 236. The occupants' survey showed a broadening of the market as a wider range, in terms of the purchaser's age, financial capa bilities, stage in the life-cycle, and the unit's purchase price was observed relative to that displayed in 1973. The major reasons for purchasing a condominium rather than a single de tached house remained their economic advantage and the freedom from exterior upkeep. Similarly, the high level of satisfaction that was observed in 1973 was again repeated here as almost 90% of the purchasers expressed satisfaction with their unit. The investigation of the developers revealed a dichotomy in the level of involvement of the entrepreneurs. The majority of developers (89%) had produced two or fewer projects involving 46 percent of the units in the province. Conversely, the top twenty firms in terms of units, representing 1.6% of all firms accounted for 11.7% of projects and 34.1% of units. These firms were heavily concentrated in Metropolitan Vancouver with 91% of their production in terms of units located in this area. The top five firms in terms of units alone produced 12.8% of the projects and 28.2% of the units in Metropolitan Vancouver. The management of condominiums, involving strata councils and management firms has improved since 197 3. Only 9 percent of the reported strata projects were experiencing deficiencies of operating budgets or in the level of their contingency re serve in comparison to approximately one-half in 197 3. The major problems encountered by the management stem from the higher density living style that characterizes most condominiums. The 237. condominium concept or its operation is not a source of major complaint. The short-run outlook for the condominium market is poor. There now exists a large inventory of unsold and/or rented units and the rate of increase in selling prices has moderated to where little or no gain has been experienced in the last year. These factors are compounded by the reduction in the rate of population growth and increase of real incomes in the province which reduces the level of overall demand for housing. In the long-run there are some positive aspects which will contribute to the future development of condominiums. First, the rapidly rising energy costs will likely lead to a concentra tion of housing in the urban areas. This will mean higher densi ties to which condominiums are well suited... Secondly,, the propor tion of older people in the population is increasing and it has been shown these make up a significant share of the condominium market. Finally, the slowing of growth in real incomes, although lowering overall housing demand, may shift some of the demand into the less expensive condominium sector away from the single detached house market. The conclusion that is reached from assessing these factors is that condominiums will remain viable in the long-run. Due to the broad nature of this study, detailed examinations of all areas within the condominium market were not possible. Having established a base from which to work from several areas for future research are indicated. 238. The occupants' survey (Chapter Four) investigated the condominium market in Metropolitan Vancouver and Victoria. It is suggested that increasing the sample size to allow for stratification geographically (Metropolitan Vancouver, Metro politan Victoria and the Rest of the Province) and by structure type would provide useful information as to the composition of the subsectors within the market. Further, an expanded sample may provide a sufficient number of renters to stratify on the same basis and the type of landlord (investor or developer) could be ascertained. Several limitations to the investigation of developers were noted previously in Chapter Five: completing the list of develop ers' names from the Land Registry Offices in Kamloops and the linking of company's names are obvious areas to be pursued. Also, greater emphasis could be placed on surveying the numerous small developers and to defining the types of lenders providing the development funds to the entrepreneurs. An essential piece of information that has been missing to date is a comprehensive price index providing reliable price trends by location, structure type, and by the level of amenities pro vided. In conjunction with this an indication of the rate of absorption of new projects through time could be constructed. The price index and absorption rates would be invaluable in investigating the trends of the development of condominiums and consumer preferences. Finally, Chapter Two provided a brief discussion of the factors influencing the development of condominiums and their 239. relationship to the overall housing market. Having now estab lished a data base it would be possible to attempt to quantify the effects of these factors. This would not only provide a greater understanding of the condominium market but also of all sectors of the housing market. 240. Bibliography Baxter, David,"The British Columbia and Vancouver Housing Markets: Short Run Realities and Long Run Trends", a paper presented at The Economic Outlook for the Real Estate Industry in British Columbia forum, presented by Executive Programmes, Faculty of Commerce and Business Administration, University of British Columbia, Vancouver, December 14, 1977. Beach, Donald J., Tax Guide for the Real Estate Industry, A Handbook for the Canadian Real Estate Association, Methuen, Toronto, 1975. Brief to the Commission of Inquiry On Property Assessment and  Taxation, Council of^Strata Corporation VR 120, Arbutus Village, December, 1975. Brown, Ian, That Classy Touch - Condominiums Promice a Way of Life, Financial Post, Maclean-Hunter, Toronto, Ontario, July 2, 1977. Strata Title Rules to the Tightened, The Columbian, New Westminster, July 29, 1977. Condominium Research Associates, National Survey of Condominium  Lenders, Central Mortgage and Housing Corporation, toronto, 1970. Condominium Research Associates, National Survey of Condominium  Owners, Condominium Research Associates, Toronto, 1970. Eger, A.F., "Choice in Housing", Housing: It's Your Move, Volume II, Technical Reports, The Urban Land Economics Division, Faculty of Commerce and Business Administration, University of British Columbia, Vancouver, 1976. Goldberg, M.A., Residential Developer Behaviour: Some Empirical  Findings, Faculty of Commerce and Business Administration, University of British Columbia, 1975. Goldberg, M. A., and Ulinder, D.D., "Residential Developer Behaviour: 1975", Housing" It's Your Move, Volume II, Technical Reports, The Urban Land Economics Division, Faculty of Commerce and Business Administration, University of British Columbia, 1976. Hamilton, S.W., Davis, I., and Lowden, J., Condominium Development  in Metropolitan Vancouver, The Real Estate Council of British Columbia, Vancouver, 1971. Hamilton, S.W. and Roberts, R.S., Condominium Development and  Ownership, Real Estate Board of Greater Vancouver, Vancouver, 1973. 241. J4elaniphy, John C. Jr., Commercial and Industrial Condominiums, The Urban Land Institute, Washington, D.C, 1976. Norcross, C, Townhouses and Condominiums: Residents' Likes  and Dislikes, The Urban Land Institute, Washington, D.C, 1973. Pavlich, D.J., "The Strata Titles Act", unpublished, University of British Columbia. Ricketts, Mark, No Down Payment Lures the Renters, Financial  Post, Maclean-Hunter, Toronto, Ontario, June 4, 1977. Roberts, R.A., "Condominium Housing in Metropolitan Vancouver", M.SC Thesis, University of British Columbia, 1973. Rosenberg, Alvin B., Condominiums in Canada, Canada Law Book Ltd., Toronto, 1969. Sagi, Douglas, "Mondo Condo (A Man's Home May Be His Hassle)", Vancouver, Magazine, Vol. 10, No. 3, March 1977. Statutes of British Columbia, 1966, Chapter 46, Now S.B.C 1974, C 89, Strata Titles Act. Statutes of British Columbia, 1974, Chapter 77, Real Estate Amendment Act. Subo.czIrene,, "House Price Indicies", M. Ser. Thesis, University of British Columbia, 1976. Truster, Perry, and Rosewig, Michael, Income Taxation in the Real Estate Industry, Canadian Institute of Chartered Accountants, 1975. 242. APPENDIX I Appendix 1 Synopsis of Previous Studies . Category Condominium Research Associates Hamilton, Davis, and Lowden Norcross Hamilton and Roberts Eger Year 1970 1971 1973 1973 1976 Methodology Survey of Owners across Canada Use of NHA Loan Application Files for Metropolitan Vancouver Survey of Townhouse Owners in Washington D.C. and California Survey of Owners in Metropolitan Vancouver Mortgage Applic ation forms of Institutional Lenders for Loans in Metropolitan Vancouver Age Most Young Most Young but a Small Older Group Wide Spread of Ages, Largest Group 30 - 39 Years Old Apartment Purchasers Considerably Older than Townhouse Young Group, Average 34, Empty Nest, Average 4 0 Years Married N.A.* N.A. 09% East 73% West 83.1% 61% Young Group 57% Old Group Number of \ Children Average 1.20 52% with no Children Average 1.04 1.05 Townhouse 0.31 Apartment 0.67 Young Group 0.52 Old Group Occupation 45% Managerial, Professional or Technical 41% Professional and Managerial 82% White Collar N.A. Young Group - 21% Professional Old Group - 47% Professional Incomes Average $11,009 68% Greater than $10,000 26% 15,000-20,000 25% 10,000-15,000 . Moderate incomes 65% less than $12,000 Young Average $19,760 Old Average. $24,900 Previous Tenancy 85% Rented 8 6% Rented 66% Rented 67% of Townhouse Rented 57.8% of Apartments rented Young - 4 6% Rented ' Old - 25% Rented Appendix 1 Synopsis of Previous Studies (contd.) Category Condominium Research Associates Hamilton, Davis, and Lowden Norcross Hamilton and Roberts Eger Year 1970 1971 1973 1973 1976 Working Wives 50% 48% 41% 40% N.A. Reason for Move Desire to Own More Space M.A. Build Equity Better Environment N.A. N.A. Reason for Condominium Purchase Economic, Maintenance Free N.A. Economic, Maintenance Free, Recreational Facilities Economic, Maintenance Free N.A. 245. APPENDIX 2 247. OWNERS' QUESTIONNAIRE This questionnaire should be completed only by those OWNING and OCCUPYING the condominium unit. If you rent the unit, please complete the enclosed "TENANTS* QUESTIONNAIRE". Before you begin the questionnaire, we would like to emphasize that all respondents will remain anonymous, and all information obtained will be aggregated in the final report. INSTRUCTIONS: Where a list of possible responses to the question is provided, please insert the NUMBER of the appropriate response in the space provided in the right-hand column. (If the appropriate answer's number includes a zero such as 01, please insert the 0 and the 1 in the spaces pro vided). If a list of responses is not provided but the answer can be expressed numerically, please complete the spaces with the appropriate number. If the answer cannot be expressed numerically, please complete the blanks provided but do not use the spaces in the right-hand margin. If you do not know the answer or if the question is not applicable to you, please leave the space blank. EXAMPLES: 1. QUESTION - What is your marital status? 01. single 02. married 03. separated or divorced 04. widow or widower ANSWER - If single, enter 01 in the right-hand column as indicated. 2. QUESTION - How old are you? ANSWER - If 34, enter "34" in the right-hand column as indicated. 0 1 3 4 3. QUESTION - What is your occupation? ANSWER - ENTER OCCUPATION IN SPACE e.g. TEACHER DO NOT USE OFFICIAL Ubfc, U^LX 248. 2 T~ ~T~ ~T~ ~T~ ~5 When did you purchase this condominium unit? (Please give the month and year). Please indicate the month with the corresponding numbers as follows: January 01 February 02 March 03 April 04 May 05 June 06 July 07 August 08 September 09 October 10 November December 11 12 2. What type of development is this unit contained in? 1) townhouse or rowhouse only 2) low-rise apartment only (3 stories or less) 3) high-rise apartment only (4 stories or more) 4) mixed apartment and townhouse 5) single family detached 6) mobile home park 7) mixed residential and commercial 8) non-residential 9) semi-detached (duplex) (Include the den as 3. How many bedrooms does this unit contain? one bedroom,; if applicable),. 4. How many people occupy this unit? a) number of adults b) number of dependant children 5. The following question applies to those adults residing in the unit. Space has been provided for responses from up to four (4) adults but please use only as many columns as required. That is, if only two (2) adults live in the unit use only the columns for "Adult 1" and "Adult 2" leaving the rest blank. Please answer all the questions for each adult living in the unit. Month 6 7 Year 19 8 9 10 11 12 13 Adult 1 Adult 2 Adult 3 Adult 4 a) Sex (select the appropriate category for each adult and enter the corresponding number in the appropriate column). 14 15 16 17 1 male 2 female - 2 - 249. b) Age (enter the age of each adult in the appropriate spaces). c) Marital status (select the appropriate category for each adult and enter the corresponding number in the appropriate column). 1 single 2 married or equivalent 3 separated or divorced 4 widow or widower d) Education (select the appropriate category for each adult and enter the corresponding number in the appropriate column). 1 highschool or less 2 1-2 years post-secondary 3 2-4 years post-secondary 4 postgraduate 5 vocational training 6 technical training e) Occupation (select the appropriate: category for each adult and enter the corresponding number in the appropriate column). 1 professional 2 managerial 3 service 4 sales 5 tradesman 6 labourer 7 clerical 8 retired 9 homemaker 10 student 11 other, please specify f) Did you work full-time, part-time or did not work at the time of purchase of this unit? (select the appropriate category for each adult and enter the corresponding number in the appropriate column. Please include homemaker and student as "did not work".) Adult 1 Adult 2 Adult 3 Adult 4 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 - 3 -250. 1 full-time 2 part-time 3 did not work g) Do you work full-time, part-time, or do not work now? Select the appropriate category for each adult and enter the corresponding number in the appropriate column. Please include homemaker and student as "do not work". 1 full-time 2 part-time 3 do not work Adult 1 "Adult 2 Adult 3 Adult 4 42 46 43 47 44 48 45 49 a) Into which of the following ranges did your total family  income fall when you first occupied this unit? 1 less than $8,000 2 $8,001 to $16,000 3 $16,001 to $24,000 4 over $24,000 b) Into which of the following ranges does your total family  income fall now? 1 less than $8,000 2 $8,001 to $16,000 3 $16,001 to $24,000 4 over $24,00 Please indicate the terms of your purchase of the unit, a) full purchase price b) first mortgage amount c) interest rate on first mortgage d) second mortgage amount 50 51 $ , 52 53 54 55 56 57 $ ; 58 59 60 61 62 63 . % 64 65 66 67 $ , 68 69 70 71 72 - 4 - 251. e) was this a B. C. government second mortgage? Yes 1 No 2 f) cash downpayment g) is the first mortgage NHA insured? Yes 1 No 2 h) is this unit financed under the Assisted Home Ownership Plan (AHOP)? Yes 1 No 2 i) is this unit financed under an agreement for sale instead of a mortgage? Yes 1 No 2 8. What are your present monthly payments for the following items? a) mortgage payment (principal and interest) b) taxes c) common area charges d) TOTAL 9. a) What were the estimated common area charges for your unit before you moved in? b) What were the actual common area charges after you moved in? 73 1$ .C 74 75 76 77 78 79 80 $ .0 8 9 10 11 .0 12 13 14 15 16 17 $ , .Oi 18 19 20 21 $ .01 22 23 24 $ _.0l 25 26 27 10. Which of the following were the two (2) most important reasons for moving from your previous dwilling? (Please rank in order of importance). 01. change in household membership 02. desired less space 03. desired less upkeep 04. desired more living space - 5 -252. 05. desired better neighbourhood conditions 06. desired a less expensive unit 07. to establish an equity 08. to be closer to transportation, work, services, etc. 09. job transfer or change 10. other(s) (please specify) 1st 28 29 2nd 30 31 11. a) Did you own a home immediately before buying your condo minium or were you renting accommodation? 1 owned 2 rented 3 lived at home or with friends but did not pay rent b) If you owned a home immediately before buying this condo minium unit, which of the following types was it? 1 single family residence 2 semi-detached residence 3 townhouse condominium 4 low-rise apartment condominium 5 high-rise apartment condominium 6 mobile home c) If you rented accommodation immediately before buying this .condominium unit, which of the following types was it? 1 single family residence 2 semi-detached residence 3 townhouse 4 low-rise apartment 5 high-rise apartment 6 mobile home 32 33 34 12. Did you look for a single family house before deciding to buy your condominium (within 6 months)? 1 Yes 2 No 35 13. a) Did you buy your unit directly from the developer, or from an individual who owned it previously? 1 from developer 2 from previous owner 36 - 6 - 253. b) If you bought it from the developer, did you buy it through one of his sales people, or through an independent agent? 1 developer's salesman 2 independent agent c) If you bought it from a previous owner, did you deal directly with the owner, or through an independent agent? 1 directly with owner 2 independent agent d) To what extent were you informed of your rights and obligations as a condominium owner before you purchased the unit? 1 very well informed 2 moderately well informed 3 poorly informed 37 38 39 14. Why did you decide to buy a condominium rather than a single family house? (Please rank only the three (3) most important reasons in order of importance.) 01. better location 02. lower full price for equal or better unit 03. lower downpayment 04. lower monthly payments 05. freedom from exterior upkeep 06. recreational facilities included with the condominium 07. other(s) (please specify and rank) lst 40 41 2nd 42 43 3rd 44 45 15. Which of the following locational features did you consider to be the most important in selecting this condominium project? (Please rank only the three (3) most important reasons in order of importance). 01. closeness to schools 02. closeness to work 03. closeness to shopping 04. closeness to bus routes 05. closeness to downtown Vancouver 06. near parkland, other wooded areas or recreational facilities 07. quiet neighbourhood 08. well maintained neighbourhood dwellings 09. surrounding residents of similar education 10. surrounding residents of similar income bracket 11. close to friends 12. other(s) (please specify and rank) 13. location was not a factor in selecting this project 254 1st 46 47 2nd 48 49 3rd 50 51 16. a) What features of your unit were most important to you in the selection of your unit? (Please rank only three (3) most important in order of importance). 01. 02. 03. 04. 05. 06. 07. 08. 09. larger than average sized rooms existence of a fireplace unique design features such as skylights, lofts, etc. (please specify) superior appliances (stove, refrigerators, etc.) apparent good quality construction greater than average storage space large patio or balcony scenic view other (s) (please specify and rank) 1st 52 53 2nd 54 55 3rd 56 57 10. features of the unit were not important in its selection b) What changes in the design of your unit would have improved its suitability to you such that you would be prepared to pay more for it? (Please limit your choice to 2 or less). You may select from the list above or answer below. 58 59 60 61 17. a) What features of the project as a whole were the most important in the selection of your unit? (Please rank the three (3) most important in order of importance.) 01. well landscaped common areas 02. large open garden or wooded areas within the development 03. adequate playground facilities for children 04. existence of a swimming pool 05. existence of a tennis court 06. existence of a workshop - 8 -07. well maintained common areas 08. adequate covered parking 09. adequate visitor parking 10. other(s) (please specify and rank) 11. features of the project were not important in the selection of this unit b) What changes in the design of the project would have imporved its suitability to you such that you would be prepared to pay more for them? (Please limit your choice to 2 or less.) You may select from the list above or answer in the space below. 18. Of the following list, generally which was the most important reason in the selection of this unit? 1 location 2 features of the unit 3 features of the project as a whole 4 price 5 other (please specify) 19. Which features of the project were sales attractions when you bought, but which you don't use now? (Limit your selection to 3 or less.) 01. swimming pool 02. tennis court 03. games room 04. sauna, steam bath, whirlpool 05. playgrounds 06. garden areas 07. workshop 08. other (please specify) 255. lst 62 63 2nd 64 65 3rd 66 67 68 69 70 71 72 73 74 75 76 77 78 09. 10. project does not have any special common features all the features are used regularly - 9 -20. a) Do you plan to live in your present condominium for the foreseeable future? 1 Yes 2 No b) If not, when do you expect to move? 1 within one year 2 1 to 2 years 3 2 to 5 years c) If you intend to move, into which of the following will be your most likely choice? 01. single family detached - rental 02. single family detached - self-owned 03. townhouse - rental 04. townhouse - self-owned 05. apartment - rental 06. apartment - self-owned 07. duplex - rental 08. duplex - self-owned 09. mobile home - rental 10. mobile home - self-owned 11. other (please specify) 21. Is the management* of this condominium project performed by the condominium association or by a professional management company? (* "management" refers to the administration of the by-laws, maintenance fund, etc.; not to the caretaking or maintenance function itself.) 1 condominium association 2 professional management 3 don't know 22. a) Are you generally satisfied with the management of this condominium? 1 Yes 2 No b) If no, can you suggest any changes which you think would improve its management? - 10 - 257. 23. a) Are there.any renters occupying units in this project that you know of? b) 1 Yes 2 No If yes, do you know how many renters there are in this project (leave blank if you do not know)? c) Is there a noticeable difference in the behavior of the renters relative to other owners generally? 1 Yes 2 No d) If yes, is the behavior better or worse than that of the other owners? 1 better 2 worse 11 12 13 14 15 24. Are you a member of the Strata Council? 1 Yes 2 No 16 25. a) In general, to what extent have your original expecta tions regarding condominium living been satisfied? 1 very well satisfied 2 moderately satisfied 3 moderately dissatisfied 4 very dissatisfied b) If you have not been entirely satisfied, what are your most important criticisms? (Please rank only the three (3) most important criticisms.) 01. poor soundproofing 02. poor construction 03. lack of privacy 04. poor attitude of other owners 05. uncontrolled children 06. uncontrolled pets 07. poor management 08. poor upkeep 09. other(s) (please specify and rank) 17 lst 18 19 2nd 20 21 3rd 22 23 258. - 11 26. If you had known as much about condominium living when you bought your unit as you do now, would you still have purchased it? • 1 Yes 2 No 27. Do you foresee any major problems ahead for your condominium? What are they? ' ; If so, how would you try to prevent them? Are your efforts in dealing with present problems successful? 28. Would you like any help in the running of your condominium (such as courses, advice, etc.)? v  29. Are there any changes you would like to see with respect to, say, the mortgage financing, the arrangements made by the developer regarding construction, sales, setting up the condominium corporation, etc. Any changes you would like to see in the condominium legislation? 30. If you have any other comments concerning condominium living in general, please use the space below (or the back of the page). Please insert the completed questionnaire (along with the unused one) into the envelope provided and return as soon as possible. Thank you for your cooperation. END 259. APPENDIX 3 \ 260. TENANTS' QUESTIONNAIRE This questionnaire should be coir.pleted only by those RENTING and OCCUPYING the condominium unit. If you own and occupy the unit, please complete the enclosed "Owners' Questionnaire". Before you begin the questionnaire, we would like to emphasize that all respondents will remain anonymous, and all information obtained will be aggregated in the final report. INSTRUCTIONS: Where a list of possible responses to the question is pro vided, insert the NUMBER of the appropriate response in the space provided in the right-hand column. (If the appropriate answer's number includes a zero such as 01, please insert both the 0 and the 1 in the spaces provided) If a list of responses is not provided but the answer can be expressed numerically, please complete the spaces with the appropriate numbers. EXAMPLES: 1. QUESTION - What is your marital status? 01. married 02. single 03. separated or divorced 04. widow or widower ANSWER - If married, enter 01 in the right-hand column: as indicated. 2. QUESTION ANSWER -How old are you? If 34 years old, enter 34 in the right-hand column as indicated. 0 1 3 4 OFFICIAL USE ONLY 2gi 1 1. When did you start renting this unit? (Please give the month and year). Please indicate the month with the corresponding number as follows: January 01 February 02 March 03 April 04 May 05 June 06 July 07 August 08 September 09 October 10 November 11 December 12 Month Year 6 7 8 9 2. How many people occupy this unit? a) number of adults? b) number of dependent children? (enter number) (enter number) 10 11 12 13 What are the ages of the adults occupying this unit? Please complete the answers for all adult residents. Adult 1 Adult 2 Adult 3 Adult 4 enter age 14 15 16 17 18 19 20 21 a) Into which of the following ranges did your total family income fall when you first occupied this unit? 1. less than $8,000 2. $8,001 to $16,000 3. $16,001 to $24,000 4. over $24,000 b) Into which of the following ranges does your total family income fall now? 1. less than $8,000 2. $8,001 to $16,000 3. $16,001 to $24,000 4. over $24,000 22 23 LEAF 262 OMITTED IN PAGE NUMBERING. - 2 -262 a 5. What type of development is this unit contained in? 1. townhouse or rowhouse only 2. low-rise apartment only (3 stories or less) 3. high-rise apartment only (4 stories or more) 4. mixed apartment and townhouse 5. single family detached 6. mobile home park 7. mixed residential and commercial 8. non-residential 9. semi-detached (duplex) 24 6. How many bedrooms does this unit have? (Include a den as one bedroom if applicable). 25 7. a) Into which of the following ranges does your monthly rental fall? 1. 0 -$100 6. $351 - 400 2. $101 - 200 7. $401 - 500 3. $201 - 250 8. $501 - 700 4. $251 - 300 9. more than $700 5. $301 - 350 b) Does this include the property taxes and' common area charges on the unit? Yes 1 No 2 26 27 c) If no, how much extra are these charges per month to the closest dollar? a. taxes b. common area charges d) If yes, but you know how much these charges are, please indicate. a. taxes b. common area charges ,00 28 29 30 .00 31 32 33 .00 34 35 36 .00 37 38 39 Prior to renting this unit (within six months) did you consider purchasing a single family home or a condominium unit? a) i. single family home Yes 1 No 2 ii. If yes, why did you not do so? 1. insufficient downpayment 2. monthly payments were too high 3. rental payments were substantially less than payments on a similar single family house 4. a substantially better unit could be obtained renting for the same payment as on a single family house 5. preferred the flexibility of renting 6. did not feel it would a good investment 7. other (please specify) condominium unit Yes 1 No 2 If yes, why did you not do so? 1. insufficient downpayment 2. monthly payments were too high 3. rental payments were substantially less than payments on a similar condominium 4. a substantially better unit could be obtained renting for the same payment as on a condominium 5. preferred the flexibility of renting 6. did not feel it would be a good investment 7. other (please specify) b) i. ix. Immediately prior to occupying this unit, in which of the following types of accommodation did you live? 01. single family detached - rented 02. single family detached - oimed 03. semi-detached (duplex) - rented 04. semi-detached (duplex) - owned 05. townhouse - rented 06. townhouse - owned 07. low-rise apartment - rented . • . 08. low-rise apartment - owned 09. high-rise apartment - rented 10. high-rise apartment - owned 11. mobile home - rented 12. mobile home - owned - 4 -263. 10. a) Do you definitely plan to purchase a home within the next five (5) years? 1. Yes 2. No 3. . Uncertain b) If yes, which of the following structure types will be your most likely choice? 1. single family detached 2. townhouse condominium 3. apartment condominium 4. duplex condominium 5. mobile home 6. other (please specify) c) Of the above, which would you most prefer? 46 47 48 END Please insert the completed questionnaire into the envelope provided and return as soon as possible. Thank you for your cooperation. 264. APPENDIX 4 266. DEVELOPERS' QUESTIONNAIRE Before you begin the questionnaire, we would like to emphasize that all respondents will remain anonymous and all information obtained will be kept in the strictest confindence. The data released in the final report will only appear in aggregated form. INSTRUCTIONS: Where a list of possible responses to the question is provided, please insert the NUMBER of the appropriate response in the space provided in the right-hand margin. If a list of responses is not provided but the number can be expressed numerically, please complete the spaces with the appropriate number(s). EXAMPLES: 1. QUESTION - What type of development is this project? 01. high-rise apartment 02. low-rise apartment 03. townhouse 04. other (please specify) ANSWER - If it is a high-rise apartment, enter 01 in the spaces provided as shown. 2. QUESTION - How many units are in this project? ANSWER - If 100 units in the project enter 100 as shown. 0 1 10 0 UriiciAL l^E ONLi 267. 4 1 2 3 4 5 Strata Plan #: Date of Registration: Name of Development: Number of unit: (enter number in margin) Location: (to be coded later) The following questions apply specifically to the development indicated above. 1. What type of development is this project? 1. townhouse or rowhouse only 2. low-rise apartment only (3 stories or less) 3. high-rise apartment only (4 stories or more) 4. mixed apartment and townhouse 5. single family detached 6. mobile home park 7. mixed residential and commercial 8. non-residential 9. semi-detached (duplex) 10. other (please specify) 2. a) When was the construction of the project started? (Please give the number of the month and the year in the right-hand margin). b) When was the last unit completed? (Please give the number of the month and the year in the right-hand margin). Month 6 7 Year 19 8 9 10 11 12 DO NOT USE 13 14 15 16 Month ^eaT 19 19 20 Month ^2 - 2 -268. c) Was this building converted from an alternate use to strata title units? 1. 2. Yes No 25 a) When were the units first offered for sale? (Please give the number of the month and the year in the right-hand margin). b) Are all the units sold? c) Month Year 19 1. 2. Yes No If all the units are sold please give the date when the last unit was sold. (Please give the number of the month and the year in the right-hand margin). Month 26 27 28 29 30 31 32 Year 19 33 34 How many months did it take to obtain authorization from the municipal government before commencing construction? 35 36 Which source of funds provided the first mortgage financing for this project? 01. chartered bank 02. trust company 03. life insurance company 04. mortgage loan company 05. Central Mortgage and Housing Corporation (C.M.H.C.) 06. institutions (pension funds, etc.) 07. private funds (including syndicated investors) 08. personal savings 09. retained earnings 10. partnership funds 11. no first mortgage financing required 12. other (please specify) 37 38 6. a) If you required interim financing other than your normal line of credit, please indicate which source of 269, - 3 -funds was used. 01. chartered bank 02. trust company 03. life insurance company 04. mortgage loan company 05. Central Mortgage and Housing Corporation(C.M.H.C.) 06. institutions (pension funds, etc.) 07. private funds (including syndicated investors) 08. personal savings 09. retained earnings 10. partnership funds 11. other (please specify) 39 40 b) Was the lender who supplied the first mortgage funds the same as who supplied the interim funds? 1. 2. Yes No 41 a) Is your firm or a subsidiary thereof still responsible for the management of this condominium? 1. 2. 42 Yes No b) If your firm is still responsible for the management, do you intend to relinquish this respon sibility within the next three (3) years? 1. Yes 2. No 43 ii. If you plan to relinquish the responsibility within the next three years, please give the expected date of relinquishment. (Please give the number of the month and the year in the right-hand margin). c) If your firm is not presently responsible for the management of the condominiums, when did you relinquish the management? (Please give the number of the month and the year in the right-hand margin). d) When you relinquished the management function did the residents hire a professional manager or did they attempt to manage the condominiums themselves? Month 44 45 Year 19 46 47 Month 48 49 Year 19 50 51 52 - 4 270. 1. hired a professional p 2. managed themselves 3. don't know e) Who is managing the condominiums now? 1. the residents 2. professional managers 3. don't know The following questions are designed to provide background information on your firm. 7. How many condominium projects has your firm developed in the past 10 years? 8. How many condominium projects does your firm have currently in the planning stages? 9. How many condominium units will your company complete by the end of 1977? How -many, were completed .in 1976?: How may in 1975? 10. a) Does your firm develop other types of real estate projects? 1. Yes 2. No b) If yes, what percentage of your net income is derived from the condominium sector? c) Please rank the three (3) most important areas in terms of generating revenue from your real estate business. 1. commercial development 2. industrial development 3. single family residential development 4. condominium development 5. land development (to the construction stage) 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 % 72 73 lst 2nd 3rd 74 75 76 - 5 - 271. 6. multiple family rental 7. commercial/industrial investment 8. commercial real estate services (leasing, etc.) 9. residential real estate services (sales, etc.) 10. other (please specify and rank) 11. a) Do you usually plan a project and then search for a site with the appropriate qualities (1) or do you usually just look for a "good buy" and plan a project suitable for that site? (2) (Please indicate response as either 1 or 2). b) Do you usually plan the developments with a particu lar economic or social group in mind? 1. Yes 2. No 77 78 12. a) In general, which of the features listed below are the most important for a successful condominium project catering to lower or middle income groups? (Please rank only the two (2) most important features in order of importance). 01. size of the units 02. location 03. layout and design of the units 04. low downpayment 05. low price 06. good recreational facilities 07. good playground facilities 08. good amenities within the unit (dishwasher, carpets, etc.) 09. other(s) (please specify and rank) lst 2nd 79 80 6 7 b) In general, which of the features listed below are the two (2) most important for a successful condo minium development designed for upper income groups? 01. size of the units 02. location 03. layout and design of the units 04. low downpayment 05. low price 06. good recreational facilities 07. good playground facilities 08. good amenities within the unit (dishwasher, carpets, etc.) lst 2nd - 6 - 272. 09. other(s) (please specify and rank 13. a) How many units does your firm have now that are completed, unsold, and vacant? b) How many units does your firm have now that were intended to be sold but are being rented now? 14. If you have any other comments pertinent to the development of condominiums which have not been dealt with, please use the space below to express them. 10 11 12 13 14 15 END Please insert the completed questionnaire into the envelope provided and return as soon as possible. Thank you for your cooperation. If you would like a copy of the survey results, please state your company name and address below. NAME OF FIRM ADDRESS 273. APPENDIX 5 275. MANAGERS' QUESTIONNAIRE Before you begin the questionnaire, we would like to emphasize that all respondents will remain anonymous, and all information obtained will be aggre gated in the final report. INSTRUCTIONS; Where a list of possible responses to the question is pro vided, please insert the NUMBER of the appropriate response in the space pro vided in the right-hand column. If a list of responses is not provided but the answer can be expressed numerically, please complete the spaces with the appropriate number(s). If the answer cannot be expressed numerically, please complete the blanks provided but do not use the spaces in the right-hand margin. If you cannot answer the question or it does not apply, please leave the spaces blank. 3 276. mil tl.a) Is this firm part of or a subsidiary of a condominium develop ment firm? 1. yes 2. no b) If yes, do you manage only those projects developed by the parent firm? 1. yes 2. no "2. Did this firm have prior experience in the real estate industry or property management before taking.on the management function of this Strata Plan? a) real estate industry 1. yes 2. no "7 b) property management 1. yes 2. no ;3.a) How many condominium projects does your firm manage? b) What is the total number of units managed? 4. Is your firm bonded for its duties as a condominium manager? 1. yes 2. no 5. Of all the strata projects.you manage, how many have their books audited professionally? :6. Of all the strata projects you manage, in how many does the current total common area charges NOT equal or exceed the current actual operating coats (including all charges which must be covered by the maintenance fund)? 10 11 Tl 13 Ti TS 16 17 T8 19 "20"2T 277. "7,. Of all the strata projects you manage, in how many does the current level of the contingency reserve fund NOT' equal or exceed the desired level of the contingency reserve fund? 8. Of all the units managed by your firm, how many are: a) owned by the original developer and rented? b) owned.by someone other than the developer but rented? T)—• o r nn no 29 30 31 32 9. How -would you rate the number of complaints against or problems encountered with non-owner residents relative to owner residents? 1. more than average 2. average 3. less than average .10.a) What are the most significant problems you have encountered in managing strata projects (i.e. the most frequent or the most contentious problems; please rank the three (3) most important in order of importance)? 1. uncontrolled children 2. uncontrolled pets 3. excessive noise from other residents 4. breaches of the by-laws by the residents 5. educating owners as to their rights and duties as condominium residents 6. collection of common expense charges 7. complaints about the level of common expense charges 8. other(s), please specify b) Please rank the following in order of most frequent use to enforce the by-laws. 1. moral suasion 2. enforcement under the Strata Titles Act 3. enforcement under the municipal nuisance by-laws 4. other(s), please specify - 3 _ 278. Generally, how would you rate the Strata Councils in terms of their knowledge of and capability for the management functions? 1. 2. 3. 4. 5. very good moderately good average moderately poor very poor 41 12. How often do you report to the Strata Council? 1. 12 or more times a year 2. 6 to 11 times a year 3. 4 to 6 times a year 4. 2 to 3 times a year 5. 1 or fewer times a year 13. Does a representative of your firm attend the strata corporation's general meetings? 42 1. yes 2. no 43 If you have any other comments on the management of this Strata Plan or on the management of condominiums in general, please use this space to express them. Please insert the completed questionnaire into the envelope provided and return it as soon as possible. Thank you for your co-operation. END 279. APPENDIX 6 281. STRATA COUNCIL QUESTIONNAIRE Before you begin the questionnaire, we would like to emphasize that all respondents will remain anonymous, and all information obtained will be aggre gated in the final report. INSTRUCTIONS: Where a list of possible responses to the question is pro vided, please insert the NUMBER of the appropriate response in the space provi ded in the right-hand column. If a list of responses is not provided but the answer can be expressed numerically, please complete the spaces with the appro priate number(s). If the answer cannot be expressed numerically, please complete the blanks provided but do not use the spaces in the right-hand margin. If the answer is unknown or the question is not applicable, please leave the spaces blank. i 5 282. 1 2 3 4 5 This questionnaire is divided into two parts. The first part should be answered by all strata councils. Part II is to be completed only by those councils that manage their own project. PART I - To be answered by all strata councils. l.a) Has there been any difficulty in getting people to run for the Strata Council of the condominium corporations? 1. yes 2. no b) Are the members of the Strata Council paid? 1. yes 2. no c) What is the average level of attendance by the members of the Strata Council at the Council meetings? 1. 80-100% attendance 2. 60-79% attendance 3.. 40-59% attendance 4. 20-39% attendance 5. 0-19% attendance d) How often do you have regular general meetings of the Strata Council? 1. 12 or more times a year 2. 6 to 11 times a year 3. 3 to 5 times a year 4. 2 or less times a year 2.a) What is the average level of attendance of the owners at the general meetings? ~1 1. 80-100% attendance 2. 60-79% attendance 3. 40-59% attendance 4. 20-39% attendance 5. 0-19% attendance 10 b) How would you rate the level of involvement in the condominium corporation activities by the owners? 1. 2. 3. 4. very high high medium low 11 283. 3. How often do you have regular general meetings with the owners? 1. 12 or more times a year 2. 6 to 11 times a year 3. 3 to 5 times a year 4. 2 or less times a year 4. Do you communicate regularly (other than by general meetings) with the owners? (for example, through regular news bulletins) 1. yes 2. no Do you manage this project yourself or is it managed by a profess ional management firm? 1. managed by strata council 2. managed by professional firm T2" T3 14 If the project is managed by the strata council, please complete Part II. If the project is managed by a professional firm, please give the name and address in the space below and return the completed questionnaire in the envelope pro vided. Thank you for your co-operation. Management firm (PLEASE PRINT): Name Person in charge Address END OF PART I - 3 -284, PART II - This section is to be completed only by strata councils managing their own project. 1. Did any member of the Strata Council have prior experience in the real estate industry or property management before taking on the management function of this Strata Plan? a) real estate industry 1. yes 2. no b) property management 1. yes 2. no 2. Does this Strata Council manage Strata Plans other than its own? 1. yes 2/ no If yes, how many other plans? 3.a) When did you assume the management of this Strata Plan? Please indicate the NUMBER of the month and year in the right-hand margin. Month Year b) Did you take over the management directly from: 1. the developer 2. a professional manager 4.a) What are the most significant problems you have encountered In managing this Strata Plan (i.e. the most frequent or the most contentious problems; please rank the three(3) most important in order of importance)? 1. uncontrolled children 2. uncontrolled pets 3. excessive noise from other residents 4. breaches of the by-laws by the residents 5. educating owners as to their rights and duties as condominium residents 6. collection of common expense charges 7. complaints about the level of common expense charges 8. other(s), please specify and rank 15 16 17 18 19 20 IT 22 "2*3 24 1st >nd 3rd 15" 2~6 27 - 4 -285. b) Please rank the following in order of most frequent use to en force the by-laws. 1. moral suasion 2. enforcement under the strata Titles Act 3. enforcement under the municipal nuisance by-laws 4. other(s), please specify 5.a) To the best of your knowledge, how many units are not occupied by their owners? b) How would you rate the number of complaints against or problems encountered with non-owner residents relative to owner residents? 1. more than average 2. average 3. less than average 6.a) Did the developer provide any warranty as to the structure of this development? 1. yes 2. no 3. don't know If yes, please continue; otherwise,- go to number 7. b) Have any major repairs been made under the developer's warranty? 1. yes 2. no c) If yes, were there any complications in having the repairs done under warranty? 1. yes 2. no If yes, please explain lst 2nd 3rd 4th 28 29 30 31 32 33 34 36 37 37 3S d) Do you feel that some repairs that have been done to this project should have been done under the warranty but were not? 1. yes 2 „ no 39 - s> -286 '7.a) Have there been any major physical improvements or additions since the development was originally completed? 1. yes 2. no b) If yes, what are they? c) Have there been any major deletions from the physical property since the development was originally completed (e.g., sale of part of the lands)? 1. yes 2. no d) If yes, what are they? 8. What were the monthly common area charges and date when the units were sold, and what is the monthly levy nov.'? 40 DO NOT USE "4T DO NOT USE DATE ORIGINAL LEVY CURRENT LEVY NO. OF UNITS Month Year ,19 44 45 46 47 49 50 . 00 "5T 32"o*3 . 00 33 35" 3o ,19 57 58 59 60 , 19 To 71 72 75 61 62 63 74 75 To . 00 . 00 "64 65 66 77 Ts 79 00 . 00 67 68 69 6 7 9. What are the current actual operating costs per month of this Strata Plan? Include all charges which must be covered by the maintenance fund. % """9" TO" TI Tl T: 10.a) What is the current level oF the contingency reserve fund? $ , 14 TS T?j T7 T? T b) What is the desire;! level of the contingency reserve fund? $ f "2*0 71 "25 73 ~ T; - 6 _ 287. •I.a) Have there been any significant changes in the by-laws of this Strata Plan since the Council of Owners was formed? 1. yes 2. no b) If yes, what are they? 26 DO NOT USE T7 12. If you have any other comments on the management of this Strata Plan or on the management of condominiums in general, please use this space to express them. Please insert the completed questionnaire into the envelope provided and return it as soon as possible. Thank you for your co-operation. END 

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