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Converters generally seek to perform apartment-to-condo conversions in attractive areas where there is no competition with affordable entry-level homes.

Shifts in the way banks secure loans (mortgage-backed securities) encourage converters / real-estate developers to approach investment banks for loans for their condo projects.

The Benefits of Condo Conversions

Apartments converted into condos enable buyers to take that first step towards home owning. Due to land scarcity, low interest rates, and escalating home prices, the average person or family has to find an alternative to buying the conventional house. Conversions provide more home-ownership opportunities or options because that alternative is now affordable.

Condominium converters are able to make cash-on-cash returns of substantial proportions while apartment owners get to cash out at the top of the market. In fact, the dollar amount paid annually by converters to acquire apartments is now well in the billions. (Profit levels can reach as high as 30 per cent more than in a straight-out sale as a rental.)

What Can Drive Condo Conversions?

Condo conversions are driven by numerous factors: job growth and a hot housing market (which makes it profitable for apartment building owners to sell); converters who see that real-estate values will continue to appreciate and that upgrading multi-family properties is a lot less expensive than new development; investors who want to make profits (read: lucrative venture). And let's not forget first-time buyers searching for affordable homes, which translates into market demand.

Numbers on the Increase

In several states, conversions have increased nearly fivefold in the last few years and in some cities, conversions exceeded the number of new rental units built.

Converters believe that real estate values will continue to appreciate. Apparently so do others, like market analysts. According to Alyson Pitarre (Builder & Developer Magazine) analysts believe, "Condo conversions are good for the apartment market because they skim off excess supply and reduce vacancy."

No Decline in Popularity Anytime Soon?

For the most part, it doesn't appear that a major decline is forthcoming. Figures have dropped slightly in some markets but overall, condominium conversions are still going strong.

"The popularity of condo conversions will remain very high as long as home-buying demand is strong," says Lawrence Yun, Economist, National Association of Realtors (NAR).

New York's Real Capital Analytics has followed conversion frenzies a number of areas. Do they see a deceleration, as some are predicting? According to Dan Fasulo, Director, Market Analysis, "So far, we don't see that."