Condo buyers lost much of their down payments during the pandemic – analysis

On average, Canadian condo buyers have lost more than three-quarters of their own down payments over the course of the COVID-19 pandemic, according to an analysis of data from the Canadian Real Estate Association.

In its review of the CREA figures, real estate information portal Better Dwelling said that the average Canadian condo price fell by 0.1% from April.

After taking insurance into account, and assuming a 5% down payment, this translates to an average of 78% of a condo buyer’s down payment lost. As a disclaimer, Better Dwelling said that this calculation did not include any possible payments over the period due to the widespread loss of income nationwide.

Using the same calculation, Toronto was found to be especially worse off. Average condo price decline from April was at 1.86%, translating to a negative 111.2% return in equity. Even including payments over the period only leads to around 0.827% equity.

“This is one of those cases where owners made payments to get barely above water,” Better Dwelling said.

The analysis warned that these trends have troubling implications for those who are looking to downsize due to the cost of condo upkeep.

“Being too broke to sell is a real thing. Buyers only default if they can’t sell in a timely fashion, after a bout of shock,” Better Dwelling said. “Selling isn’t free; there [are] a lot of costs involved – including agent commissions. The higher the value of the mortgage, relative to the value of the home, odds increase the buyer will have to pay to sell. If they can’t afford to sell, the odds of seller default increases.”