The “Real Estate Board of Greater Vancouver” recently published listing and sales statistics for the month of May, 2019 and after a sluggish start to the year sales have picked up dramatically and once again, pre-construction condo and townhouse sales are hot.
If you have given some thought to purchasing a pre-construction condo or townhouse for investment or personal use purposes, this article will be of interest to you. Like most things in life, there are pros and cons to doing this.
Let’s start with the pros:
- Typically you can purchase a pre-construction property with a five or ten percent
down payment, while you watch the value of the property increase between your deposit date and the actual possession date.
- For some buyers, this one or two year possession date provides the opportunity to save funds or dispose of other real estate holdings to increase the equity position in the new property.
- Another advantage to purchasing a pre-construction home is the fact you can customize it to your liking. Things like paint color, flooring, kitchen cupboards, appliances and finishing options allow you to literally create your dream home.
- Pre-construction homes are usually built with the latest technologies; plumbing, heating, central air and electrical systems in addition to alarm and speaker systems.
- Since condo and townhouse developments are managed by a strata council, they provide the owner with virtually care-free ownership. Whether its a personal lifestyle preference to be free of the headaches and upkeep required for a detached home or if you are an investor not wanting to deal with day to day issues and complaints from tenants, this is a great option.
Let’s take a look at the cons:
- Purchasing a pre-construction condo or townhouse will result in GST being charged on the property of 5% which is not payable on a used home.
- Strata fees are a fact of life for condo and townhouse owners. Typically on a new development the monthly fees will be in the $150. to $225. range depending on what all might be included. And over time these fees will increase.
- Your ROI (Return On Investment) for a condo or townhouse in this marketplace will increase as year over year appreciation fluctuates based on real estate industry conditions, however the ROI to be expected from a single family detached home will always be greater.
10 steps for purchasing a pre-construction condo or townhouse:
- Find a trustworthy professional real estate agent to represent you.
- Establish a budget price that you can afford and have a five to ten percent deposit in the bank.
- Select the city / municipality and neighbourhoods you most prefer.
- Create a wish list for the property you would like to purchase, including location, price, number of bedrooms and bathrooms.
- Viewing pre-sale centers for condo and townhouse developments and checking out the show suites.
- Investigate the developer and their history… this is a background check if you like. Find out what other projects they have completed in recent years and check to see if they completed on schedule. There are nightmare examples where some developers are more than a year behind schedule and have caused great distress to buyers. You definitely do not want to go through that!
- Once you have found what you are looking for, NEGOTIATE. As a rule developers are reluctant to reduce their asking price by much more than a token amount, however they are often receptive to greatly reduced upgrades… for appliances, lighting fixtures, finishing trim and so on.
- After the negotiation period, you should be ready to sit down with your real estate agent and write an offer.
- Depending on the timeline for completion of the pre-construction condo or townhouse you will need to meet with your financial lender to establish a pre-approved mortgage. Ideally this should be done three to four months prior to possession. A reputable developer will send out period updates (letter via email usually) to keep you in the loop with respect to their progress and your possession date.
- Once your offer has been accepted you should communicate with the developer’s representative to customize and design your new home to your liking.
Your real estate agent will always ask their clients to seek legal and accounting advice on every real estate transaction and since we are not legal experts, it is in your best interests to do this to ensure a seamless, stress-free transaction.