Is pre-construction a good choice in 2021?
Prior to the COVID-19 pandemic, comments such as “The market is heating back up again like it did before” and “There are bidding wars on everything” were growing increasingly common. Although there was some truth to this, it is so far from the truth – especially given the extraordinary circumstances we’re facing.
To help put everything in perspective, let’s take a look back.
Even before corona virus, there was uncertainty in the market. Just a few years ago, virtually all resale listings were selling in less than a week. Prices were shooting up faster than buyers could save. Bidding wars were the norm. Condos, lowrise homes… they all sold, and sold quickly. It was a seller’s market, however, not everything was equal. There was a difference in price appreciation between detached homes and condos.
Once lending rules changed, prices started to fall. Not everything was equal; the higher priced, higher end properties were decreasing in price, and fast. The landscape of affordability and buying power began to shift. Although condo prices were decreasing as well, those in the lower range were better able to sustain prices. As a result, the gap between freehold and condo started to shrink.
Fast-forward a few years after the implementation of the stress test, buyers began snatching up the lower priced properties. The strategy of holding offers and creating a bidding war is back, but not across the board. Lower priced condos were selling quickly again, and many of them in bidding wars. This applied to lower priced freehold homes, as well. However, higher end and priced properties were taking 30-plus days to sell.
Before COVID-19, the market was not how it used to be, unless the property was on the lower entry price to the market. And, of course, now there is still a lot of unknown.
With this in mind, pre-construction is a great option. Buyers still have to manage the risks involved as best as you can, such as future interest rate increases, personal circumstances, employment and other factors. This is where a good agent can help you maneuver through the obstacles.
Under normal conditions – and hopefully when corona virus passes – the market is balanced, overall. There are opportunities for both buyers and sellers, depending on the type of property.
And, of course, how the market responds post-COVD-19.
Arie Buzillo is a real estate broker and an investor specializing in buying and selling properties all over the GTA. He works out of Century 21 Leading Edge Realty.