What is it about buying a new house or condo that appeals to so many people? Is it that new-home smell? Shiny new appliances you can see your reflection in? The decreased likelihood of there being a scary old ghost living in the closet?
Whatever the reasons, Canadians pay quite a premium for a brand-new home. Which these days ― given that 80 per cent of all new residential units in Canada are condos ― means a brand-new condo.
According to Urbanation, a new condo in Toronto cost an average of $779 per square foot in the first quarter of this year, having surged some 50 per cent since 2016. Meanwhile, a resale condo cost $683 per square foot, making new condos 14 per cent more expensive.
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In Vancouver, Statistics Canada data shows condos built in 2016 and 2017 are 9.4 per cent more expensive, per square foot, than those built just before that, in 2011 and 2015.
And these days, that new condo comes with some risk, too. With the market having seen a massive upswing in prices followed by a slowdown, many condo projects are now being cancelled ― some for a lack of demand, and some because construction costs have soared since the project was launched.
According to new data from Altus Group, in Vancouver, one out of every five condo units that developers filed for approval in 2016 have been abandoned by the developer.
In Toronto, that ratio is much lower, at 2 per cent of all units launched in 2016. But that may not be an apples-to-apples comparison, because the approval process in Toronto is much slower. Only 5 per cent of 2016 applications have been approved in Toronto, compared to 50 per cent in Vancouver.
And an analysis carried out by the Globe and Mail suggests what’s happening in Vancouver may be just around the corner for Toronto. The newspaper looked at condo projects begun before 2016 and still not completed, and found that “(w)hile many appear to be delayed but still on track, others bear a distressing similarity to projects recently cancelled.” It concluded “dozens” of projects may be in trouble.
In many cases, construction costs soared since pre-sales began and developers can’t turn a profit at the prices they offered several years ago. But many jilted homebuyers simply accuse the developers of greed, pointing out they can sell the same units in a new project launched today at much higher prices.
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To say the least, this has been frustrating for buyers in these projects, who ― years after thinking they had bought a new condo ― found themselves with nothing but a refund on their deposit.
For many, it represents a significant financial loss: Not only have they missed out on the equity gains from a property they thought they had bought years earlier, but they now face having to buy in a much more expensive market.
For those who’ve already put a deposit down on a new condo and are wondering whether their purchase is at risk, Urbanation market research director Pauline Lindeman offers a simple acid test: Call the developer and see if they call you back.
If they’re in trouble, “they just don’t call you back,” she told the Globe.
For those who haven’t yet bought, now may be a good time to consider buying a resale condo, despite its non-shiny appliances and potential ghosts living in the closet.