Buyers Stepping Back, Insurance Already Chilling Market

[Vancouverisfalling]

1)People just starting to understand the seriousness of these changes

2)Some buildings simply cannot get Insurance without expensive repairs and maintenance, causing Strata Fees to Spike

3)Mortgage Lenders will not approve purchases of Condos which do not qualify for Insurance

4)Condo prices will be impacted and the market is already feeling the chill

https://www.msn.com/en-ca/video/news...rns/vi-BBXz0Nc

[cairnstone]

Originally Posted by Vancouverisfalling

1)People just starting to understand the seriousness of these changes

2)Some buildings simply cannot get Insurance without expensive repairs and maintenance, causing Strata Fees to Spike

3)Mortgage Lenders will not approve purchases of Condos which do not qualify for Insurance

4)Condo prices will be impacted and the market is already feeling the chill

https://www.msn.com/en-ca/video/news...rns/vi-BBXz0Nc

Sounds like a planned system to make bulk purchases by developers. Strata s that are denied insurance are typically already beyond saving them. Councils would most likely chose to not do the depreciation report. This triggers a downhill spiral. Mortgage companies will charger higher rates across the board and insurance rates go up. These effects push owners out and assembly owners buy up units and turn a strata into buildings where rental units are more than owner occupied.

I believe it was about 6 years ago the mandatory reporting was made into law but votes at agm could delay the reports being done and this caused those buildings to see a lower climb in value and typically more investment owners that take control of the strata for personel gain

[SFUVancouver]

This is a problem I lay squarely on strata councils that resolutely refuse to maintain proper maintenance reserves and perform routine preventative maintenance, let alone urgent repairs requiring special assessments due to said inadequate maintenance reserves.

There are few more powerful change agents than insurance rates and underwriters' reinsurance rate pressures. We're seeing it in coastal areas in the US where annual inundation from more powerful storms and inadequate storm surge protection is making insurance a ruinous proposition, and we're beginning to see it in areas now routinely hit by seasonal forest fires. It's soon going to be an intractable problem for boomers hoping to avoid strata fee increases and special assessments until they can cash out. Buyers should start lopping tens or hundreds of thousands off asking prices to compensate for deferred maintenance and risk exposure to insurance rate hikes.

[rofina]

Originally Posted by SFUVancouver

This is a problem I lay squarely on strata councils that resolutely refuse to maintain proper maintenance reserves and perform routine preventative maintenance, let alone urgent repairs requiring special assessments due to said inadequate maintenance reserves.

There are few more powerful change agents than insurance rates and underwriters' reinsurance rate pressures. We're seeing it in coastal areas in the US where annual inundation from more powerful storms and inadequate storm surge protection is making insurance a ruinous proposition, and we're beginning to see it in areas now routinely hit by seasonal forest fires. It's soon going to be an intractable problem for boomers hoping to avoid strata fee increases and special assessments until they can cash out. Buyers should start lopping tens or hundreds of thousands off asking prices to compensate for deferred maintenance and risk exposure to insurance rate hikes.

The problem is people down vote any increase in strata fees that goes much beyond inflation. Proper maintenance costs money, money that people don't want to pay.

But when you only approve 3% increase in fees annually, but your strata insurance goes up 46% YoY, maintenance costs go up 10%, taxes go up 10%. You're bleeding, and impossible to balance the books.

So you propose a 10% increase in fees, and all of a sudden the AGM magically has nearly every owner turn up and explain to you why its a bad idea.

The increase is down voted, the strata goes under funded until a major repair comes up. At that point owners face a special levy of who knows how much. I have seen from $10,000 to $100,000. And half the owners down vote that too. This part I have never understood. Whats the hope? Leaks fix themselves? Pipes replace themselves?

[cairnstone]

Originally Posted by rofina

The problem is people down vote any increase in strata fees that goes much beyond inflation. Proper maintenance costs money, money that people don't want to pay.

But when you only approve 3% increase in fees annually, but your strata insurance goes up 46% YoY, maintenance costs go up 10%, taxes go up 10%. You're bleeding, and impossible to balance the books.

So you propose a 10% increase in fees, and all of a sudden the AGM magically has nearly every owner turn up and explain to you why its a bad idea.

And the council is a new Canadian, a teacher, a lawyer, a call center worker etc. And they have no clue about how a building works. The strata property manager is a new Canadian with only one qualification is that she can use most of Office. SO owners don't get a clear picture of the strata condition. I sat on a council and every meeting was a battle. And also ran across the same issue with so many management companies.

One of the major causes of leaky condos was the strata's themselves. Most had turned off the HVAC units in common areas. They are an essential part of the building envelope, by pressurizing the hallways they remove the moisture rich stail air in the units passively through bathroom vents and range hoods.

[WarrenC12]

Originally Posted by rofina

The problem is people down vote any increase in strata fees that goes much beyond inflation. Proper maintenance costs money, money that people don't want to pay.

But when you only approve 3% increase in fees annually, but your strata insurance goes up 46% YoY, maintenance costs go up 10%, taxes go up 10%. You're bleeding, and impossible to balance the books.

So you propose a 10% increase in fees, and all of a sudden the AGM magically has nearly every owner turn up and explain to you why its a bad idea.

The increase is down voted, the strata goes under funded until a major repair comes up. At that point owners face a special levy of who knows how much. I have seen from $10,000 to $100,000. And half the owners down vote that too. This part I have never understood. Whats the hope? Leaks fix themselves? Pipes replace themselves?

Yep. I watched one building go through about 6 special general meetings to get a critical envelope repair passed.

People are cheap and stupid. Just look at who gets elected into office...

[s211]

Originally Posted by cairnstone

These effects push owners out and assembly owners buy up units and turn a strata into buildings where rental units are more than owner occupied.

Slightly o.t., but I'm surprised to see how many condo projects are being converted to rental in the U.S. Completely different market dynamic there.

[cabotp]

People get what they deserve

[cairnstone]

Originally Posted by s211

Slightly o.t., but I'm surprised to see how many condo projects are being converted to rental in the U.S. Completely different market dynamic there.

There was a period here in parts of Canada that rentals were converted to Strata. The townhouse that I owned was sold off from BC housing I believe to a FLorida investment group. They did a bit of a reno to some things and then sold it off

[s211]

Originally Posted by cairnstone

There was a period here in parts of Canada that rentals were converted to Strata.

Yes, it was big in Alberta 10-20 years ago. Just strange to see things go the opposite direction in the U.S.

[cairnstone]

Originally Posted by s211

Yes, it was big in Alberta 10-20 years ago. Just strange to see things go the opposite direction in the U.S.

Could be a better way to package them. THe strata act is way different in the states as I recall the fees are based on occupied suites not overall units. So some are very pricey.

[rofina]

This post was made on December 5th, close enough to start of the month.

The increase in sales for December, YoY, was 88%.

Does it really seem like this change chilled the market?

Beware of people trying to peddle propaganda, on both sides of the fence.
There definitely is a cohort of "its always a good time to buy" people.

Neither view should ever be absolute, recognise changing conditions and make decisions accordingly.

[misher]

Originally Posted by cairnstone

And the council is a new Canadian, a teacher, a lawyer, a call center worker etc. And they have no clue about how a building works. The strata property manager is a new Canadian with only one qualification is that she can use most of Office. SO owners don't get a clear picture of the strata condition. I sat on a council and every meeting was a battle. And also ran across the same issue with so many management companies.

One of the major causes of leaky condos was the strata's themselves. Most had turned off the HVAC units in common areas. They are an essential part of the building envelope, by pressurizing the hallways they remove the moisture rich stail air in the units passively through bathroom vents and range hoods.

Seriously they turned off the positive pressure system? Dumbasses.
A lot of units report leaks when they are actually just suffering from condensation.

A large problem here is that everything rises faster than inflation except the rent you can charge the tenant. So of course every owner doesn't want to face larger maintenance fee increases because they can't pass them on to the tenants.

And btw a property manager is slightly more educated than a McDonalds worker. You have vast gaps between experience levels of managers, no one wants to do it so the only ones who are any good tend to be much older ones who were unable to switch industries. However, they tend to lack enthusiasm/energy for the job.

Property managers deal with budgets in the 100's of thousands, some over a million. And they then do that for anywhere from 10-30 buildings. All with 2 months of education and lower pay than a skytrain attendant combined with 3 night meetings a week so your working about 50 hour workweeks plus your on call for emergencies. Its a industry in desperate need for revision but its been ignored because under the real estate council realtors makeup over 90% of licensees. Also no one wants to tell condo owners that they need to pay their property managers more and treat them like human beings.

Check out all the crap Pacific Quorum managers have had to deal with. Your treated like a lawyer/doctor with regards to your legal liability but paid crap and work crap hours. You also are required to follow huge books of conflicting rules you learned in 2 months online.
http://www.stratawatch.ca/directory/411/X026846.html
Or checkout the nice reviews people leave, why would you want to work a low paying job where you work more than 40 hours a week, get sued often, and just get grief.
https://www.yelp.ca/biz/pacific-quor...es-vancouver-2

Originally Posted by rofina

This post was made on December 5th, close enough to start of the month.

The increase in sales for December, YoY, was 88%.

Does it really seem like this change chilled the market?

Beware of people trying to peddle propaganda, on both sides of the fence.
There definitely is a cohort of "its always a good time to buy" people.

Neither view should ever be absolute, recognise changing conditions and make decisions accordingly.

Lol I know I'm told I'm on the other side of the fence but realistically even I'll admit at this time you'd be insane to buy a place to rent out, a luxury condo, or a house. The only thing that may be a decent investment is a really cheap condo simply because of supply and demand, we have few cheap condos but a whole lot of demand for them. The bottom of the market is moving up fast and the gap between cheap and expensive is slimming. Commercial office/industrial sales are pretty good, I suspect industrial and office will just keep going up. Land sales are way down as is multi-tenant. Hotels are probably a good investment. I suspect there's a decent chances houses may still go down a bit overall, I think the bottom houses will go up while the top still goes down some.

Now is a really really really bad time to be looking for a rental condo though, supply is going to dry up. Who wants to own a rental when insurance is skyrocketing and you can't pass on costs to your tenant.

I doubt they will do it but the NDP knows damn well that we need to at least allow inflation+1% rental increases. They are throwing homeowners under the bus along with potential new renters. Who wants to bet that somehow "greedy homeowners, foreigners, and money launderers" somehow gets blamed when our "rental crisis" becomes a "rental catastrophe".

[jollyburger]

In 2019, the building paid a $66,000 premium through insurance broker BFL. Last month, the strata council got its bill for 2020: A whopping 780 per cent increase to a premium of $588,000.

Or $241K with less coverage.

266 suites.

https://globalnews.ca/news/6374159/a...nsurance-hike/

[whatnext]

More today. Maybe we shouldn't have bet the farm on big multi-unit buildings.

Warning of collapse in B.C. condo market
Ross McLaughlin 2018
Published Thursday, February 6, 2020 12:52PM PST
Last Updated Thursday, February 6, 2020 3:48PM PST

VANCOUVER -- There are dire warnings that the condo real estate market in B.C. could collapse unless the province steps in to stop it.

It all has to do with skyrocketing insurance rates. And some condo buildings are unable to get insurance at all, putting owners at risk of losing their financing and being unable to sell their properties.

Zafar Khan had an offer on a Cloverdale condo he was selling, and the deal was to close Feb. 3. But at the last minute it all fell apart, as the buyer pulled out of the sale.

“I found out the strata ran out of insurance,” said Khan.

He said he had no idea, and only learned about it later from the buyer’s real estate agent, Sevin Atilla.

“We found out the strata’s insurance came up for renewal and they were not able to renew it,” said Atilla, who works at Oakwynn Realty.

“I don’t blame the buyer at all,” Khan said.

Banks won’t finance uninsured buildings and that’s what happened with the loan the buyer had secured....

https://bc.ctvnews.ca/warning-of-col...rket-1.4800633

[CanSpice]

Maybe ICBC can start offering stratas insurance...

[SFUVancouver]

This strikes me as another "we told you so" moment with respect to the economic costs of climate change: as localized catastrophic natural disasters increase in financial severity and alter actuaries' risk tables, it raises the cost on insurers everywhere due to the skyrocketing cost of reinsurance.

With that said, it is wholly, wholly unsurprising that stratas that systematically under-invest in maintenance and lack sufficient reserves are being hit hardest, up to and included now being uninsurable at any price.

[WarrenC12]

Originally Posted by SFUVancouver

This strikes me as another "we told you so" moment with respect to the economic costs of climate change: as localized catastrophic natural disasters increase in financial severity and alter actuaries' risk tables, it raises the cost on insurers everywhere due to the skyrocketing cost of reinsurance.

I'm not sure whether it's an excuse or reality though. We haven't really seen the effects of climate change on that scale (yet).

Market consolidation (oligopoly) and less revenue from other investment areas (due to low interest rates) are the better explanations for spiking rates, IMO.

Think about any other market. It prices are spiking 50-100% annually, surely a "low cost" competition would jump in at some reduced rate.

[s211]

The large majority of flooding issues in multi-res buildings arise from water escapes within (broken pipes, vandalized sprinkler systems, etc.), not natural flooding. To tie natural flooding to water escapes is a bit tenuous.

[SFUVancouver]

I concede that the line between anthropogenic climate change and local insurance rates increasing is not readily clear, but I believe it is happening is a contributing factor to the cost of insurance increasing.

With respect to trends regarding the increasing frequency of major natural disasters, consider this from NOAA:

In 2019, there were 14 weather and climate disaster events with losses exceeding $1 billion each across the United States. These events included 3 flooding events, 8 severe storm events, 2 tropical cyclone events, and 1 wildfire event. Overall, these events resulted in the deaths of 44 people and had significant economic effects on the areas impacted. The 1980–2019 annual average is 6.5 events (CPI-adjusted); the annual average for the most recent 5 years (2015–2019) is 13.8 events (CPI-adjusted).

2019 is the fifth consecutive year (2015-2019) in which 10 or more billion-dollar weather and climate disaster events have impacted the United States. Over the last 40 years (1980-2019), the years with 10 or more separate billion-dollar disaster events include 1998, 2008, 2011-2012, and 2015-2019.

https://www.ncdc.noaa.gov/billions/

With respect to insurance costs associated with more frequent and severe natural disasters, here are a few items:

Fires, storms and floods cost $150 billion in 2019. More disasters are on the way

Munich Re, one of the world's largest reinsurance companies, said Wednesday that it expects to see an increase in the frequency and intensity of weather-related disasters in certain parts of the world. Reinsurance companies sell cover to insurers to protect them from very large losses.

"We expect 2020 to be part of this trend towards increasing losses from weather-related disasters, a trend that we have been observing over the last decade," Ernst Rauch, Munich Re's chief climatologist, told CNN Business.

Climate change is contributing to the increase in extreme weather events, said Rauch.

Munich Re, which has been studying climate change since the 1970s, has observed an increase in severe thunderstorms in North America and Europe. The storms are at times accompanied by hail, tornadoes and flooding, and their frequency can most likely only be explained by climate change, Rauch added.

In Australia, a prolonged period of extremely dry and unusually hot weather has added to the severity of bushfires in the country and can likely be attributed to global warming, he said.

"What climate change does is change probabilities, so if we see an increasing probability of large losses from wildfires that indicates that climate change is contributing," added Rauch.

Losses from Australian wildfires have increased over the past four decades, Rauch said.

The Insurance Council of Australia said in a statement Tuesday that insurance losses from bush fires this season stood at $700 million Australian dollars ($481 million).

Insurers have received nearly 9,000 claims since September and "many more" are expected to be lodged in coming days and weeks, the Insurance Council said. At least 26 people have died in the fires, according to Australian police.

Japan typhoons

There were 820 natural catastrophes in 2019, slightly below the previous year but well above the long-term average of 520, according to Munich Re. In 2018, losses from natural disasters amounted to $186 billion.

Japan's typhoons Hagibis and Faxai together accounted for the largest overall losses ($26 billion) last year, followed by Typhoon Lekima, and floods in India and China.

Natural disasters cost the insurance industry $52 billion in 2019, below the previous year but above the 30-year average. This is partly due to lower cover for flood losses in developed countries, Rauch said.

Disasters such as Mozambique's Cyclone Idai — which caused $2.3 billion in losses and more than 1,000 deaths — were almost completely uninsured, he said.

More people are taking out cover for natural catastrophes in rich countries, but insurance penetration has barely increased in the developing world, Rauch said.

An increase in losses from weather-related disasters will cause premiums to rise and make it more expensive for business and property owners to buy insurance, he said.

https://twnews.us/us-news/fires-stor...are-on-the-way

Insurance Covered $90B of Natural Disaster Losses in 2018, Leaving 60% Protection Gap

The economic costs of last year’s 394 natural catastrophe events came to US$225 billion with insurance covering US$90 billion of the overall total, creating the fourth costliest year on record of insured losses, according to an Aon report titled “Weather, Climate & Catastrophe Insight – 2018 Insight Report.”

[...]

The biggest driver of catastrophes in 2018 was the tropical cyclone peril following several significant landfalling storms, which included Hurricane Michael and Hurricane Florence (United States); Typhoon Jebi and Typhoon Trami (Japan): Typhoon Mangkhut (Philippines, Hong Kong, China), and Typhoon Rumbia (China).

Indeed, $89 billion of the overall insured price tag of $90 billion came from weather-related disasters, said Aon.

The report noted that 2017 and 2018 brought the costliest back-to-back years on record for both economic losses (US$653 billion) solely due to weather-related events, and for insured losses across all perils (US$237 billion).

Andy Marcell, CEO of Aon’s Reinsurance Solutions business, commented: “2018 was another active year for global natural disasters. While there was not a singular ‘mega’ catastrophe event, there were 42 billion-dollar events which aggregated to a slightly above-average year. The re/insurance industry continues to withstand the payouts backed up with US$595 billion of capital but focus on managing the cost of changing climate and weather events by helping to close the protection gap.”

Additional major events during the year included a series of major wildfires in Northern and Southern California. The costliest insured loss event of 2018 was the Camp Fire at US$12 billion, which also became California’s deadliest and most destructive fire on record, said Aon.

“Among the takeaways from the events of 2018 was the recognition that catastrophe risk continues to evolve,” said Steve Bowen, director and Meteorologist at Aon’s Impact Forecasting team.

“The complex combination of socioeconomics, shifts in population and exposure into vulnerable locations, plus a changing climate contributing to more volatile weather patterns, is forcing new conversations to sufficiently handle the need for mitigation and resilience measures,” he added. “Natural disasters are always going to occur. How well we prepare can and will play a key role in future event losses.”

https://www.insurancejournal.com/new.../22/515420.htm