I need to get something off my chest.
The pre-construction prices in the GTA are out of control. There, I said it, now I feel better.
Over the past few months I have had a front seat to a number of new pre-construction projects that have entered the market. I will typically welcome new development as it ushers growth, revitalization and a general improvement of the city and neighbourhoods. Unfortunately lately I am forced to cringe as many new launches enter the market with an absurd price. The kind of pricing that does not make any logical sense to any investor.
The main reason an investor will consider buying preconstruction is to GENERATE A PROFIT. In other words, pay a price reasonable enough that hopefully by the time the project is completed, the selling price exceeds what was paid originally. If this does not happen, or has an incredibly low probability of happening, then entering in an agreement of purchase and sale makes no sense at all.
I am tired of seeing projects launch 30-40% ABOVE resale average. These developments will often claim they are Luxury, as this is the only leg to stand on. Trust me, Toronto has Luxury Condominiums – Shangri La, Four Seasons, Ritz Carlton, St. Regis, maybe Nobu. (the verdict is still out on this one).
A Scarborough condominium with 300 sq.ft Studios and 400 sq.ft 1 Bedrooms is NOT Luxury and will never will be. I have a better chance of making it to the NBA than this project being qualified as luxury once completed.
Assuming resale average is $1,000 PSF, buying at $1,400 PSF makes NO LOGICAL SENSE WHATSOEVER. This would mean that over the course of 4 years of construction and sales the average market price will need to increase by 10% every, single, year.
This is not happening.
We have been blessed with a strong 2019 Market and our average increase in the condominium market is 5.5%.
You may have seen some agents say that 90% of projects out there are not worth investing in. I will estimate this figure to be 97%.
97% of all pre-construction projects in the GTA are not worth investing in.
This should be your takeaway after reading this blog.
In typical Realtor fashion, message me to find out what the 3% are.