As some of you may be aware, on Wednesday September 19th, The Gupta Group – parent company to the Easton’s Group founded by Steve Gupta, issued a notice to all of its 1,200 buyers informing them that their purchase at Icona Condos – once marketed as the tallest tower in Vaughan, is no more and has been terminated. Buyers are receiving their deposits back as you read this paragraph withoutinterest. Needless to say this news is disappointing to all, the builder, the Realtors, but most importantly to the buyers who have lost precious time and appreciation dollars being locked into contracts for a property that is not to be. This issue is compounded by a similar outcome of another Vaughan condo project by Liberty Developments called Cosmos. Cosmos was also cancelled earlier this year to the tune of approximately 1000 units. In both cases the builders are citing “construction financing issues” and rising building costs.
So what is the issue here? Is this becoming an alarming trend in the development industry or is there something wrong with the so called Vaughan Metropolitan Centre?
To answer the latter, absolutely not. Just look at Transit City, a development located next to the Comos and Icona sites. It is thriving, well under construction, and about to launch a third tower. All under careful watch of CentreCourt Developments.
Let’s approach this issue from a purely mathematic standpoint and consider the odds of such event occurring, then I will attempt to explain how a prudent buyer can eliminate this risk entirely.
As per the recent article by TorontoStoreys (http://torontostoreys.com/2018/09/condo-cancellations-toronto-real-estate/) and I quote – “In data provided to Toronto Storeys by Urbanation, the research firm suggests there were 437 condo buildings opened in the last five years and only 35 buildings failed to be built and occupied.” If this is true, the mathematical odds of your condo project experiencing a similar fate are a measly 8%. This is comforting.
When you take a deeper look into the developers whose projects were cancelled – Park Avenue Homes, Stanton Renaissance, Dunsire Developments, Castlepoint Numa, Time Development Group, Liberty Developments, Eastons Group and others,you begin to see a trend. The reality is that most of the builders in this list are 2ndtier developers. Some have recently entered the scene, and some do not even have any completed possessions in Ontario in their portfolio!
In pre-construction builder reputation matters. The number of completed possessions matters. In other words, the pedigree is paramount. Buying from a reputable TIER 1 builder should be your focus, and if you are unsure, there is a valuable public resource at your disposal – https://www.tarion.com/ontariobuilderdirectory. Here you can check the years in business, number of completions and any outstanding claims a builder has.
I fully believe that under the right guidance, armed with the right information, the 8% odds mentioned earlier can be lowered next to nil.
Consumer confidence is important in any industry but even more so in pre-construction. Do not let a few bad apples give you the wrong idea. Investing in pre-con real estate today is safer and more profitable than ever.