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The Condo Game is thought provoking and the website has lots of supplementary information.  For that reason, I encourage you to watch it.

Attention focused on two ideas.  First, that the high rise condo buildings are poorly constructed.  Second, that the development process which led to them being built is flawed and the resulting social costs will be paid by others.  (I have already noted some thoughts about this issue.)  A proposed cause of both of these issues is a profit motive.  The profit motive must be acknowledged but one should not forget that there are at least two sides to every market.

It seems to me that some questions deserve to be asked.  They directly invoke four of the Six Big Ideas of Real Estate that fill our classes.

1/ Even buyers paid a lot for poorly made buildings, there is a difference between being lied to, making a bad decision and making a trade off.  Nobody wants to discover that their “dream home” is imperfect, yet we make trade offs all of the time.  Especially with residential real estate, buyer’s regret is a common feeling: the only thing worse than paying too much for your dream house is to be outbid by somebody else.

But, regret does not necessarily imply a bad decision.  Being lied to is a different issue; it is unethical and is not a recipe for long term survival.  The documentary failed to make that process faster by distinguishing good and bad developers (FYI: reports by Tarion and the Ontario Home Builders Association might make interesting reading).

2/ There are so many stories of legal contracts being written in favour of the developer that I am surprised that anybody is surprised by the fact.  Of course, you should take the purchase and sale document to your own lawyer.  The statements about standardizing documents make sense to me as a way to reduce confusion at a reasonable cost for everybody.

The peculiarities of the condo document reveals how owning a condo  differs from owning your own place: your enjoyment depends on your ability to get along with your neighbours (whoever they may be or will be).

3/ Especially because of the rumours of so many condos being bought by investors, I wonder who bears the cost of poor construction.  The first renters stay in a nice new place for a couple of years then leave.  When the next tenants arrive, the new rent depends on the building’s reputation (either in terms of construction or neighbourhood liveability).  So, investor-owners who forget that real estate is a long term asset will pay the cost.  Developers who can sell only to forgetful foolish investors will not succeed in the long run.

4/ People bought their place because they wanted to.  Remember that one of the reasons why the U.S. price bubble continued for so long, and why the crash was so painful, was that government policies encouraged home ownership.  Canadian politicians have been criticized for discouraging home ownership.  Rob Carrick has a series of excellent articles which suggest that, for many people, home ownership is not a great idea.

It is easy to criticize afterwards.  Before, caveat emptor is a good idea for lots of reasons.

PA

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