Let’s get one thing straight right off the bat – condominiums are the hottest commodity in todays real estate climate. Even more so than freehold properties.
Why you ask?
The answer is very simple – because of the mortgage stress test. Upon introducing the new federal guidelines in January of 2018, the government of Canada has inadvertently started steering most purchasers towards the more affordable housing type – condominiums.
Armed with this fact, in my opinion any Torontonian interested in making money in the Real Estate market should be holding at least one or two pre-construction condo units. For those that are not, let’s explore three factors that are preventing you from buying pre-construction today.
Probably the biggest barrier to any purchasing decision is the selling price. It is no secret that Downtown Toronto’s pre-construction pricing has been going up at a crazy pace which has barred a large portion of the population from purchasing. Average price of a pre-construction project in downtown Toronto as I write this article is approximately $1,100 per square foot. If you are one of the individuals who are on the cusp of the purchasing decision but are finding the options in Downtown out of reach, never be afraid to look outside the city. York region offers some excellent projects that are being sold at a huge discount when comparing to Downtown. It Is not impossible to find condominiums selling in Mid $700’s Per Square foot including Parking! (ie. D’or Condos) If even these options are out of reach do not be afraid to consider Hamilton or Ottawa. Brad Lamb has some excellent projects in both Cities – Television City in Hamilton and Soba in Ottawa. These projects may even offer rent guarantees and other attractive investor-geared incentives and are quite literally half the price of Toronto’s.
- Deposit Requirement
The next biggest roadblock after sticker shock is the deposit outlay required to complete a purchase. Standard deposits vary from 20-25% on most new pre-con projects. Keep in mind it is rare, but still possible to find pre-con projects offering a deposit structure as low as 10%-15%. This may be done in the form of a limited-time incentive, or in the case of Daniels Regent Park a standard deposit structure!
Pay attention to deposit timelines as well. It may actually be beneficial to buy into a project that occupies later rather than sooner. For Example, M2M Condos in North York or Lakeside Condos in Downtown both occupy in 2022. This will give you plenty of time to save for and meet the 5% deposit installment interval requirements.
A lot of the potential purchasers that I speak with on a daily basis are their worst enemy when it comes to making a purchasing decision. Instead of relying on cold hard facts and numbers, emotions are being let into the equation. Purchaser needs to maintain focus and complete the purchase because it makes financial sense with the help of a calculator. If location, building, design, floorplan or amenities are not what you prefer, remember that this is an investment – you are not living at this property. Your tenants will be doing so, and providing you with the cashflow you are after.
Purchaser mindset and focus is also very important. Do not allow social media, news outlets or friends and family to persuade or dissuade you. It is best to tune out the noise, have a few trusted and reliable advisors and proceed accordingly.
In conclusion, what I’ve learned is that with pre-construction there is one simple rule that everyone should keep in mind – Do not wait to buy, buy and then wait. If you are not currently holding a pre-construction condominium or townhome, I urge you to rethink your strategy. Every minute you wait is costing you money.