If you have ever considered purchasing real estate in Canada, then you’ve heard of investing in condos.
But pre-construction condos are becoming increasingly popular especially in high-density cities.
Recently, however, pre-construction condo units have gained quite a bit of traction. While the benefits of buying a pre-construction condo unit are amazing, the surge in popularity ultimately comes down to the real estate markets.
The Benefits of Buying Pre-Construction Condo Units
Before diving into the finer details of the market for these units, it’s important to understand the fundamental advantages of buying pre-construction.
You can think of buying a pre-construction condo unit as reserving a unit from a building that a developer is planning on constructing.
The Condominium Authority of Ontario contains full information related to purchasing a condominium unit. Developers ask for these reservations because it helps them secure financing for the construction of the building.
In return, you receive a few monetary benefits compared to regular condo purchases.
For one, you can get some great discounts depending on which stage you buy the unit in.
There are 4 purchase stages and during the first 3, you’ll receive a discount.
The second monetary benefit is that by buying the unit today, you pay today’s real estate prices and once the building finishes construction, your unit will be appreciated.
You also get the financial freedom to spread your down payment throughout the construction phase. Instead of having to immediately pay 20% on signing, you pay 5% at key moments during the lifetime of the construction.
Additionally, since you only own the property after several months of construction, you don’t need to get approved for a mortgage when buying a unit.
The largest barrier for many homebuyers is getting approved for a mortgage. Banks will often use a mortgage stress test to determine your eligibility, but with a pre-construction unit, you won’t have to make any mortgage payments until you own the unit.
The Rising Popularity of Pre-Construction Condo Units
There are many situations where buying pre-construction is the right move regardless of market conditions.
But recently, its popularity has risen significantly as downtown real estate markets change. Everyone knows that highly populated cities are crowded with little room for new buildings, but these populations continue to grow and space is limited.
That’s why there are very few detached homes in the most popular cities and why the demand for condos will continue to rise for the foreseeable future. Condo apartments are an extremely efficient use of the limited land available.
Unfortunately, the coronavirus pandemic took a large toll on the condo market, but even as things started returning to normal, the Toronto condo market experienced an 80% increase in sales.
As things continue to progress and people need places to live downtown, the demand for condos will skyrocket. Many of these people don’t want to buy a condo unit because they want the freedom to move around, so they choose to rent their units.
This is a large opportunity for any real estate investor because if you buy a pre-construction unit, there’s a high chance that it will be located in a busy district. With the rent payments from tenants, you can pay off the mortgage and earn your money back quickly.
Should I Buy a Pre-Construction Condo Unit?
Like any real estate investment, pre-construction condo units are large financial obligations.
While you receive quite a bit of financial freedom before the unit is built, once you own it, it’s your responsibility. You’ll have to start paying off a mortgage and finding tenants to rent it out if you aren’t planning on living in it yourself.
Luckily, you do have several months to prepare, but you should use that time to prepare by building up your assets and ensuring you’ll have a mortgage available when needed.
Currently, pre-construction units are a sought-after asset because of their future benefits, but the choice is ultimately yours. The success of these units depends on the market you buy them in and the local demand for housing.
With the right purchase, you could get a great deal on a profitable investment.
Thanks for reading, please let me know your thoughts and comments below.
Top 10 Popular Posts Of All Time
- Top 30 Canadian Blue Chip Stocks You Should Own
- How To Use A My Service Canada Account
- How To Watch Free TV Shows In Canada – List of 10 Best Sites
- VGRO Review – Vanguard’s Best Growth ETF Portfolio
- Top 7 Canadian ETFs You Should Own
- Top 150+ Dividend Stocks In Canada – Complete List
- Credit Karma Canada Review – Free Credit Score And Report
- CPP Payment Dates – How Much CPP Will You Get?
- Top 5 High-Interest Savings Accounts In Canada
- How To Open A CRA My Account?
Sagar Sridhar is a personal finance blogger from Canada. His genuine passion for personal finance coupled with his unique style of writing is what stands out. Professionally, he is a computer engineer, agile certified and has a master’s degree in Project Management. His writing has been featured or quoted in the leading Canadian publications such as Credit Canada and many other personal finance publications. While he is juggling between his day job and blogging, he is the main author on this blog and has miles to go before making the final pit stop.