Pre-Construction condos in Toronto
Thinking about buying pre-construction? We have all the trends, insights, and tips you’ll need to get started.
New building projects and increased sales have given the pre-construction condo market edge back to the 416 in 2022 — for now.
But rising interest rates keep 905 and 416 pre-construction sales nearly neck and neck.
While both buyers and builders have cooled since the Bank of Canada increased interest rates this year, pre-construction condos can still be a huge opportunity for property speculators, buyers who want to stay in Toronto or city people planning an escape to suburbia.
Buyers opting for Toronto and 416 homes pushing back the 905 market surge
The rush to buy in the suburbs, potentially fuelled at least in part by the COVID-19 pandemic, cooled enough in 2022 to give Toronto and outer 416 regions a return to the top of the new condo market.
The 905 area codes, including Hamilton, fell from 53% of new condo sales in the first six months of 2021 to 47% in the first six months of 2022. Toronto and the outer 416 regions, however, saw a boost in 2022 from the past two years.
The continued attention on the 905, however, fuels discussion that the 416 is running out of space to build new condos. Driven by the outrageously high prices for single family homes, developers are instead putting their efforts into building more condos and the numbers demonstrate this: while a record number of homes are being built across Canada, the percentage of single-family detached homes has fallen from one in four to one in five. The difference is being seen outside the core, and that’s where you’re going to find value — if you have vision.
Evaluating a pre-construction condo
Like with any other investment in property, location is the most important factor. But unlike most re-sale condos, the quality of life afforded by the building and neighbourhood isn’t always fully realized, so having vision is key. To that end, take a few moments to consider:
- The jurisdiction: Is it in a city, town, village, hamlet? Can you see yourself living in the community?
- The immediate area: How close is the building to important places like groceries, highways, public transit, etc.?
- The immediate surroundings: What’s to the north, south, east and west of the building? If it’s undeveloped land, what’s likely to be developed?
- Future surrounding buildings could affect the value of your condo.
- The number of units: You’ll usually find an inverse relationship between unit numbers and condo fee charges per month.
- The building promised amenities: Are they realistic? Will you use them? How much will they impact condo fees?
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How to find a pre-construction condo
The pre-construction condo market has always been a bit of an insider’s club.
For larger cookie-cutter buildings, developers will create multi-channel marketing campaigns (the industry even created awards shows for these campaigns). If you search “pre-construction condos Toronto,” you’ll find websites, email sign-up prompts and all the information you need about the listed pre-con condos.
But the real gems aren’t listed like that.
To keep competition relatively low at the pre-con stage and attract more motivated buyers, these places are marketed primarily to real estate agents who specialize in pre-con condos. So, if you’re looking for something on the more unique side, your best bet is to connect with them.
The pre-construction agent community is quite well-established in Toronto proper but is in a relatively nascent stage in the 905. For this reason, it’s important to vet the agent you work with.
How does buying a pre-construction condo work?
Unlike a resale where you pay the seller their money, take possession of the property and go about your day, the pre-con purchase process is a bit more involved.
Step 1: The contract. When you decide to pull the trigger on a place, you’ll sign a contract and pay a percentage of your down payment to hold the unit.
Step 2: The cooling-off period. You have 10 days after the contract signing to change your mind and get your deposit back.
Step 3: The second deposit. If you decide to stick with your purchase, you’ll owe another percentage of the down payment 30 or so days after sale.
Step 4: The third deposit. You’ll make another payment 3 to 6 months after the second deposit.
Step 5: The fourth deposit. This will be due 9 to 18 months later.
Step 6: Finally, occupancy. After the major construction is done and the building is safe to occupy, you’ll move in — but you won’t technically own your condo yet. Instead, you’ll be in a state of occupancy and pay the developer rent for 3 to 6 months as they complete enough of the building to pass it off to the condo board.
Step 7: The transfer of ownership. You’ll pay the remaining of your financing, and take ownership of the condo.
Is buying pre-construction a good idea?
It depends on the confidence you have in your vision for what a neighbourhood could be and the reason you’re considering a pre-construction condo.
If the condo is for you to live in one day, have an idea of where you’ll live between the day you buy the condo and the day it’s ready. Factor in the probability of construction going over schedule for up to a year.
This is where vision is most important because you’re banking on someone else wanting to live there. Consider the kind of tenant you’d want and find a pre-con that meets their needs.
A real positive of picking a pre-con condo is that by the time you take possession, it will most likely be worth much more than when you bought it. If you pick the right development, you’ll turn a profit on the sale even with the capital gains and land transfer taxes you’ll have to pay.
One last point about buying a pre-construction condo
If you plan to occupy your new condo, consider joining the condo board. This will give you insight into building information and future plans — most notably, ones that could affect the value of your condo.
Even if you don’t join the condo board, have an idea of what kind of master insurance policy they’re thinking of for the building, as this will affect your condo insurance.
If you’re on the market for a pre-construction condo, you’ll need condo insurance eventually. Get a quote today to help forecast your budget.