If you’re looking to buy a condo in Toronto, it may be a good time to do so. According to the CMHC’s latest Canadian housing market outlook, the Toronto condo market is beginning to favor buyers as the number of available inventory and resale condos rises. Canadian housing prices are expected to stay stable in the next few years — all pointing to favorable conditions for condo buyers.
Despite this, buying a new condo in Toronto can be daunting. You’ve probably heard at least a few horror stories of fraud and condo mismanagement costing condo owners thousands in building repairs.
Should you buy pre-construction or resale?
There is no right or wrong answer – Some agents may tell you PreCon is a bad idea – this is inexperience shining through. The truth is, there’s plenty of good and bad investments in both the resale market and the new/precon market. No matter which route you decide to go, you need to find an agent is experienced in the market you’re interested in, and do some research for yourself.
Buying a pre-construction condo is exactly what it sounds like. You are buying a condo that has not yet been built from the builder before construction starts.
There are a number of advantages and drawbacks to going this route.
- Price – Pre-construction condos are sometimes cheaper due to the risk that construction will be delayed or called off.
- Customization – You get to be the very first owner of the unit and have the option to customize a variety of features in the condo, including cabinetry, flooring and appliances.
- Time to Save – The deposit is furnished to the builder in a series of payments, giving you more time to save money for your condo. Something to note: it is common to pay 20 to 25 percent of purchase price in deposit by the time of occupancy.
- ‘Phantom Rent’ – Although you will be able to move into your unit as soon as it is ready, the rest of the building may still be under construction. You can’t start making mortgage payments until you officially own the unit.
- Tax – Pre-construction sales in Toronto are subject to HST. However, if you plan on living in the unit, you are eligible for a refund.
- Uncertainty – During the time it takes to complete construction, there is some room for error. The builder may not sell enough units to continue with construction (very rare), or the finished condo may differ slightly from what you expected.
Buying resale is traditionally the most common method of purchasing a condominium or home. Buying resale has it’s own pros and cons, as outlined below:
- Certainty – You don’t need a vivid imagination to know what you are getting yourself into. Rather than buying from floorplans or model suites, you can see the unit you intend to purchase.
- Clear Costs – It is generally easier to figure out the total cost of purchase with a resale. You can get your mortgage pre-approved and figure out your monthly payments today.
- Immediacy – Move in as soon as you close. It doesn’t get faster than that.
- Bidding Wars – These often occur for attractive units in popular buildings. Bidding wars can drive the price of a unit far above what you can or want to pay, and they happen only with resale. Prices are set and fixed with PreCon. In today’s market in the GTA, these are becoming more and more common and are practically commonplace.
- Renovations – If your unit and building are older, then you may need to budget money for renovations and maintenance charges.
- Rental Desire – Renters are interested in all the same things owners are. They want the newest and best in both suite features, finishes, and building amenities. This is only applicable if you intend on renting out your unit as an investment property.
In reality, your decision to purchase either a pre-construction condo or a resale condo will depend on whether you’re looking for a primary residence or an investment property (or a combination of both), your budget and time frame, as well as what you’re specifically looking for