A nice heritage home sold in Old Town this week. The asking price was competitive, but no cigar. The new owner got it for 14 per cent less.

As mentioned here last week, it’s a buyer’s market. Lots of inventory. Scant sales. Sticky prices, now (apparently) starting to crack.

What a change from when my dog-walking bud Harold sold his house around the corner a year ago (and sadly moved to St. Catharines).

He got an unsolicited juicy offer and closed at his convenience with no commission. Now the place has sprouted a fancy French name painted on the front in (of course) fancy script.

We love real estate. On average 55 per cent of Canadians’ net worth is in it. When you strip out renters (currently half the Toronto population) that number zooms higher. We also carry $2.2 trillion in mortgage debt. How much is that? It’s bigger than the whole economy.

My neighbour thinks he’s a condo genius. Or did. He bought four in downtown Toronto. After all, rents have been steadily rising. Prices always go up. And who can trust the stock market, he asks? Real estate, he adds, is real. What can possibly go wrong?

As it turns out, lots. With condos, more than a lot.

First, rents are falling. Not rising. That was so 2023. In the GTA, the average monthly for both one and two-bedders is down year over year. As interest rates roll back, this will ripple through the market.

Second, rental condos are a financial sinkhole. Even the banks who lend the mortgage money to buy them agree. A report from my pal Benny Tal, now chief economist at CIBC, is a stark warning for anyone thinking about being a landlord.

In 2022, for the first time, a majority (52 per cent) of rental condos with a mortgage lost money. Last year it was 77 per cent. So far this year, 82 per cent.

The average monthly loss to owners is $597, which is 2.5 times higher than two years ago. Condo carrying costs increased 21 per cent last year. Rents went up 8 per cent. Do the math.

Third, condo prices are eroding. Resale inventory is growing fast (almost 12,000) and there are over 17,500 unsold new condos in Toronto alone. Per-foot valuations — which had been as high as $1,400 for recently completed buildings — have plopped to about a thousand. 

So tons of supply and tepid demand means properties are worth less. Not only are investor-landlords in negative cash flow, they own units losing equity and they probably can’t sell them.

Worse, if you decide to sell within a year of buying you face the federal anti-flip legislation. Any profit is added to income and taxed at your marginal rate.

But any loss cannot be used as a deduction from capital gains. Unfair — for which you can blame Finance Minister Chrystia Freeland.

But wait. The misery ain’t over yet.

If you must turf your tenant, you can’t. Non-payment of rent doesn’t give you the right to change the locks.

And it could be endless months before the case comes before the overloaded landlord/tenant board. In Toronto now a renovation will require an engineer’s report before a notice to vacate can be delivered. And then there may be an appeal. 

And if you get fed up and leave the unit empty? 

Then face the vacant-house tax in Toronto, even if you decide to stay in the place every weekend to escape the crush of humanity on NOTL’s Queen Street.

That tax is a killer at 3 per cent of market value. On an $800,000 condo, it’s $2,000 a month, atop condo fees, property tax and financing.

Still want to be a GTA landlord? Opt for a root canal instead.

Garth Turner is a NOTL resident, journalist, author, wealth manager and former federal MP and minister. Email: garth@garth.ca.