There is no doubt that the pre-construction real estate market in Toronto has definitely changed over the past 6 months. It was only a few months ago that eager buyers lined up for weeks to purchase condos in select projects in the city. From 1Bloor to Aura at College Park, there were too many buyers and not enough units. Buyers were eager to pay the lowest price per square foot on condo units with the expectation of prices increasing dramatically thus lining their pockets with dollars.
Recently there has been a large shift in the demand for pre-construction condos in Toronto. It is now the builder's trying to get buyers into their presentation centers by offering attractive incentives and large credits on closing. My question is how does this reflect on the builder? First off, it is not fair to previous purchasers who purchased at the beginning of the project without these incentives. Even though the price per square foot may have been slightly lower at the time, it does not equal to a $50,000 credit on closing that some projects are offering in the city at this time.
Another question that comes to mind is what everyone is talking about and that is lending. There was a time when pre-construction projects only have to achieve 70% of units sold to acquire construction financing. With lenders more hesitant than ever to give financing, builders are desperate to increase sales in return to increase their chances of obtaining the financing required. This is when all those incentives come into play.
So the next time you go into a presentation centre to purchase a condo in Toronto because of all the incentives the builder is offering, ask yourself "Why are they offering me incentives?" The answer is because sales are needed to achieve financing. If sales are not achieved, the project may not go ahead which means the whole process has been a waste of time. Ask the right questions before you sign your agreement and remember that when projects are not offering incentives, they are not in a position where they need to.
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