The pre-construction phase is a popular time to buy a new home or condo, for a number of reasons. Usually at this stage in the game, the home builder offers more competitive pricing to raise the funds needed to get shovels in the ground faster.
This is also the time for buyers to get their choice of lot, floor and exposure, as well as customize their home to their personal preferences.
But every reward carries some element of risk — the really good ones do, anyway.
With a pre-construction purchase, one of those risks is that the development could fail.
How often does this actually happen? The risk is relatively small, according to Debbie Cosic, founder and CEO of Mississauga-based In2ition Realty, but it does happen. “In 2016, there were five cancelled projects totaling 400 units,” she says. Cosic is quick to add that in the same year there were a total of 90 projects completed, with just over 18,500 units.
For those 400, the repercussions can be devastating.
Recently, a new Mimico condo, once touted as a transit-friendly hot spot, is making headlines after being placed in court-ordered receivership.
All the gritty details were originally reported by the CBC back in April. Now, condo buyers who found and purchased their not-yet-built dream homes as far back as 2011, could well find themselves priced out of the 2017 Toronto housing market altogether.
We compared condominium apartment prices from 2017 and 2012. The average condo in the City of Toronto sold for $318,600 in January 2012. As of June 5, 2017, that price was $477,600 – a difference of $159,000 (source: Toronto Real Estate Board). That’s gotta hurt.
This begs the question, why do people purchase pre-construction? That’s a lot of money to put down on a plan and a promise that it will be built in a few years.
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