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Some people—even some Realtors---cling to the myth that we should not invest in condominium homes because, "you don't get any land". What nonsense. Show me a condo that hangs from the sky! All condominiums are built on land. That land has obvious value, and often more value than that of a single-family home. Note that in Calgary today you can spend $3 million on a palatial condo apartment.
Along these lines we have all chuckled at the TV ad in which the overbearing mother drags her reluctant daughter and boyfriend to see houses, when what they want is a condo apartment. The young people know what some folks don't yet realize, namely that inner-city locations sporting high-rise condominium buildings bring a share in land value that's often higher than suburban single-family home lots.
Sure we in condominium homes don't individually own our portion of the building's land. So what? Our share of the land ownership is in proportion to our suite's unit factor, giving each one of us true title in a home on valuable high-density-zoned land with the right to sell, give away or bequeath our property. What do I care that the land beneath my property is collectively owned, rather than individually? The investment value of my share is just the same, and market appreciation for condo homes in recent years certainly bears that out.
One way to roughly quantify the land value that comes with our condominium homes is to lay the insurance coverage amount next to the building's total market value. While a large building might be insured for $30 million, the market value of the suites within it can easily total $45 or $60 million. That's because the land itself would not need to be rebuilt in event of a loss. Divide that land value among the owners by their suites' unit factors, and they'll have an idea of what land value they each own.
Some people are distracted on the land value question by the fact that the City levies no tax on the common property of condominium developments. It's not that the land with its location, its parking, the building's structure, the tennis court and swimming pool have no value, but rather that the value of those assets is reflected in the market value of the homes within the development, which then pay the property taxes in proportion to that value. The land value in its location, perhaps downtown or next to the Bow or Elbow rivers, plus the improvements on it, explain why condominium homes can have per-square-foot market values vastly exceeding those of houses. Remember the $3 million luxury condo suite? There are, in fact, lots of those.
As a matter of fact, Calgary condo owners have a complaint with the City on exactly this point. Property taxes are levied on a market-value basis. Because condo townhouse and apartment developments are built more densely than house subdivisions they are served more cost effectively with sewers, storm drains, water pipes, roads and sidewalks. Condo owners are, in my mind, paying more than their fair share in support of the city's infrastructure. Urban planners used to debate this, but today it's accepted as truth. It is suburban city councilors who now debate it with inner-city councilors, fearing a shift of the property tax burden to their inefficient suburbs.
Talk to your representative about that one, but we won't be distracted from our point. Condominiums come with land that has value, just as a house stands on land that has value. It makes no difference that someone owns their single-family lot individually, while another person owns his condominium land jointly with 40, 100 or 200 other people. Each plot of land has value in proportion to its location, to its density of use and to the living value that it provides to its owners. And my share of my condo building's land value may well exceed that of my friend's land under his single-family home.
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