Considering to buy builder condos?
Is your objective to live in it or use this as an investment property to be rented out?
Before buying builder condos in both the above scenarios, you need to carefully evaluate what you’re getting into.
Time is constantly changing and what was true in the past might not be true in today’s market. I’ve been selling builder condos since 2003 and in my view, I don’t see a value when buying a condo in some of the current new builder projects. There was a time when buying builder condos, especially in the high-rise segment (with a few exceptions) made a lot of sense. But these days you need to carefully analyze the market before making your decision.
I can give you many examples where builders in Mississauga launched condo projects in which buyers did not make a single penny in profit even after two to three years from the date of delivery.
Can you imagine that people had bought these builder condos two or three years before they were finally delivered?
So basically, they made zero return or merely broke even after paying the buying and selling costs and carrying the investment for almost five years or more. Of course, there are some profitable builder condos where people have made good returns.
What does this mean for you if you are considering builder condos?
Before investing your money into any builder condos project, it is very important to speak to an experienced condo realtor. Ask him or her to compare builder prices with today’s market prices of similar resale condos.
I have seen some current projects in the new builder segment where prices are around $70 to $90 per sq foot more than resale market. Or in other words, a 1,000 sq ft condo in a resale market is available for $70,000 to $90,000 lower in price as compared to new builder condos.
Here are a few examples where condo investors did not make any returns over a short term period (approximately 5 years from date of public launch). Condo investors at Absolute Condos (50 and 60 Absolute Ave), Chicago Condos and Limelight Condos by Daniels, will vouch for this. Condo investors did not make any money even after four or five years post delivery of their condo units.
Why did people not make money in these new builder condos?
Simple – the launch prices were very high and the market did not catch up to those prices even after three years of delivery. The resale market on the other hand performed well during the same time period. When buying a new condo, novice consumers do not do their home work, they simply don’t know if the project will be worth investing into, or they do not work with condo focused local realtors.
Once bitten twice shy
Investors and brokers keep a track of builder reputation on prices, construction quality and after sales service.
These days a prominent Mississauga builder is having a tough time selling his newly launched towers because they did not keep investors happy with the quality of their project. There were many plumbing issues, pipe bursts, elevator problems etc. in a few of the completed towers in the recent past. Contrary to what was promised as high-end construction quality and luxury feel, once finished, even the lobby failed to provide an attractive and welcoming appeal to the condo building. First impression is very important when it comes to condominium buildings. And unless there is a WOW factor when entering into the lobby area, potential buyers don’t get excited.
Now the market is waiting to see how the builder ends up completing some of their other towers in the pipeline, before market puts its trust back in the builder. Same is true for builders who sold projects on a big hype where investors bought overpriced units.
In the nut shell, there are no short-cuts to what is promised and what is finally delivered to consumers. Builder condos are no exception to this rule. But again, market buys on hype or emotion. I am quite confident that many of you will read this article before the damage is done. So please share this blog post with people who you think could end up investing in the wrong pre-construction condos or newly launched builder condos.