Buying in and living in a multi-family housing development like a condo complex is often the smart choice for people who are of more limited financial means and don’t need to expanse – or expense – of a detached single family home. As we all know, those are in very shorty supply in the locations where most Canadians would prefer to or need to live. So many realtors in Canada will have more than a few clients who bought condos as first-time homebuyers. And we can assume the majority of them have been very happy with their new homes.
Perhaps at least until now.
Market forces have changed the dynamic of the average home buyer’s focus, and many realtors will be seeing that the bulk of their new clients are exclusively in the market for a home in one of these multi-family developments. It’s as important to be able to be perfectly receptive to the wishes of your clients, and in much the same way it’s important to be generating new clients in the first place. Here at Real Estate Leads our online real estate lead generation system is an excellent way to help take care of that part of the equation, while being able to cater to your clients’ wishes will take a lot more self-investment.
It’s worthwhile to use today’s blog to talk about an issue that is growing in leaps and bounds in as far as what it’s doing to condo owners not only in Canada, but around the world. Strata insurance rates are exploding with increases that are hard to fathom how exactly they’re possible, not to mention hard to fathom how on earth something like this is happening.
Unfortunately, the fact is that insurance companies are for-profit business ventures like any other, and there’s a very pressing and real global phenomenon that’s forcing them to react to protect their legitimate business interests.
Let’s have a look at this now
Big 3-Digit Percentage Increases for Some Strata Insurances
Yes, we’re not exaggerating when we says some condo strata are presenting their members with insurance coverage increases that are in the 3-digit percentage range. In British Columbia, insurance rates there have leapt between a believable 50 and a staggering 780 per cent. In a market like Vancouver where new homeowners who have bought condos are often stretched very thin financially paying mortgages and affording all of life around that, these increases are about as big a problem as possible.
A large number of condominium buildings across the Lower Mainland and elsewhere in B.C. have seen massive jumps in their insurance premiums and deductibles this year, and experts say high property values are a contributor, but not the primary one. Instead, it’s the growing risk of climate change-related weather events that is promoting these stratospheric increases in condo strata rates.
As mentioned briefly above, insurance companies have no choice but to increase premiums when they face increasingly large payouts. We won’t get into how the property insurance business model works, but trust us when we say that there is little to no way around how this works. When greater numbers of claims are paid out, greater influx of funds is necessary to maintain the viable business model.
Climate change isn’t any ONE particular person or group of people’s fault, and we can’t blame any one person or the insurance industry itself for the way this is. It’s important to remember this.
Owners on the Hook – For Now
These increases have left many a strata with little choice but to shift a portion of this increased burden to condo owners, who are now being put on the hook for their own personal policies and seeing bumps in strata fees.
However, the good news here is that the Insurance Brokers Association of B.C. is taking action to try and rectify this, to any extent that’s possible. The IBABC has proposed two reforms to the province’s Strata Property Act, including a $50,000 cap on upper loss assessments.
This cap is a good idea, although whether it would take the industry’s interests sufficiently into account remains to be seen. This cap would be for deductible assessment and non-insured loss assessment, and the idea would be that owners could access adequate and affordable insurance products to protect their residences from they refer to as ‘potentially unmanageable financial loss.’
The second part of what they’re proposing is a standard definition of a strata unit to see to it that the basic components of a condo — its walls, ceilings, drywall, sub-floor, basic electrical and plumbing — are covered under the strata’s insurance, and in some cases with only the deductible on a claim being the responsibility of the owner.
Finished items – carpets, countertops, plumbing fixtures, appliances and upgrades for example – would be the owner’s responsibility to maintain and insure. The belief at the IBABC is that this will promote greater stability in the strata insurance market, and in the bigger picture continue to make condos and other multi-family dwelling real estate a more realistic option for them.
Big Picture Realities
In the bigger picture, the ability of first time homebuyers to get into the market into these types of homes is a very essential part of having a healthy housing and real estate market, as there are different steps for different folks that benefit all when taken.
It’s for this reason that realtors should have a vested interest in keeping the entryways open for first time homebuyers this way, and not seeing exorbitant strata insurance rates working against that. We voice our support for the IBABC and recommendations could protect millions of strata unit owners from further risk of losing their homes and quite possibly help mitigate future insurance market cycles.
Here’s to hoping something can be done about this, because we absolutely sympathize with people who are faced with what has to be a terrible shock.
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