Should I buy pre-construction in Toronto right now?

Credit: CentreCourt Developers

Once upon a time, buying a condo before it was built was a great way to get a deal. But those days are long gone: developers now price pre-construction units based on what they’re likely to be worth once they’re finished, not what a comparable property is worth now. So there are no deals to be had – buyers looking at pre-con should expect to pay a pretty significant premium.

Despite the prices, though, pre-con projects often sell out in a matter of days. Who’s buying them – and why? Cameron Miller, Sales Representative says there are 4 good reasons to buy pre-construction in Toronto right now, despite the higher price.

1. You don’t have to get a mortgage right away.

While you do have to come up with a 20% deposit eventually (the 5% minimum is only for first-time buyers of resale properties), that deposit is spaced out over several years. Usually, you have to pay 15% before occupancy (over several payments), then the final 5% at occupancy. If you’re looking at a project that will be completed in 3 years, you have those 3 years to come up with the cash.

“If you’re currently in a situation where you aren’t able to get a mortgage – you’re self-employed or you aren’t earning enough to qualify for a high enough mortgage – pre-con can be a good workaround,” says Cameron.

Read more: Resale or pre-construction?

2. You can customize your unit.

With a pre-con property, you don’t have to settle for someone else’s choices. You can pick the floor plan you like and the finishes that reflect your style. And you may even be able to customize your floor plan.

“With higher-end units, you can often work with the builder to create a layout you like better,” says Cameron. “I have clients who have removed and repositioned walls to extend rooms or create a more open feel. To do that with a resale, you’d have to do a reno.”

3. You’ll be the first owner.

Moving into a fresh, unlived-in space is something that’s appealing for many people.

4. Pre-construction real estate can be a smart investment.

There’s a reason why investors are the primary buyers of pre-construction units. They don’t have to invest a lot upfront – they just have to come up with the deposit. They can also sell before occupancy in an assignment sale, offering up the unit to a buyer who wants a brand new unit but isn’t willing to wait years to live in it.

“An assignment sale isn’t like a regular property sale,” says Cameron. “There are a lot of rules around selling a contract before occupancy. But investors do it all the time: it’s a great way to make a profit before having to pay for things like land transfer taxes, which are payable on closing. You do need to work with an agent who specializes in assignments, though, since it can be a complicated process.”

However, if none of those reasons apply to you, pre-con may not be the right route.

You should be buying resale if:

• You want to get into the market now

• You have a down payment (5% minimum for first-timers buying under $1M, 20% for everyone else)

• You already like an existing building

• Making a decision based on a floor plan makes you nervous

• You don’t want to pay a premium