Presale condos are commonplace in the Vancouver housing market.  As the city attempts to bolster housing inventory in order to combat rising prices, they are greenlighting multi-unit condo developments at unprecedented rates.  With the increase in condos available, it should be no surprise that presale condos are increasingly available as well.  If you’re interested in purchasing a presale condo, these tips for buying presale could save you significantly.

Know your Risk

Sizeable investments such as real estate investments always carry some risk, and presale condos represent unique risks that you may or may not understand.  Knowing the downside of buying these properties can help you avoid certain pitfalls that can cost you a lot of money.  First time home buyers should especially take note as presale condos are not typical when compared to completed properties currently on the market.  In fact, presale condos represent a contract wherein the purchaser agrees to pay for a condo at an agreed upon future date.  Future market conditions or financial resources are not relevant, so it’s important to know the risks.

First, presale condos are subject to taxes including GST and HST.  As is the case with all new property purchases in British Columbia, you’ll be required to pay these taxes when the presale contract is completed.  In addition, property transfer tax will need to be paid, so you’ll need to include these taxes in the final sale price of your condo.  Most buyers are not surprised to learn they’ll owe taxes, but the fact that these taxes are essentially deferred until the sale completes means they can sometimes be overlooked.

Of greater cause for concern is that your presale condo contract does not reflect market changes.  So, if the housing market falls, you’re still required to pay the agreed upon price for the condo.  This means that the market value of the condo when you finally take ownership may be less than you agreed to pay and you cannot terminate the contract.  That’s right, you cannot back out of a presale condo contract.

Negotiating Mortgages

Another factor to consider when purchasing presale condos is that mortgages are not always guaranteed.  Many buyers can have a mortgage approved for a presale condo, but it can be tricky.  You’ll need to be clear with your lender of your intention to buy a presale condo to ensure your mortgage will be approved.

The Great Unknown

Finally, since your presale condo is not a physical property you can tour before you purchase it, you need to be very careful to negotiate all expectations in your contract.  If you’re expecting granite countertops and a whirlpool tub, make sure that’s in your contract.  It’s even advisable to have a lawyer review your contract before you sign because developers rely on the fine print to protect themselves in case they can’t deliver on all their sales promises.

Metro Vancouver continues to experience above-average demand and below-average supply!

The Real Estate Board of Greater Vancouver (REBGV) reports that residential home sales in the region totalled 2,795 in November 2017, a 26.2 per cent increase from the 2,214 sales recorded in November 2016, and a 7.5 per cent decrease compared to October 2017 when 3,022 homes sold.

Last month’s sales were 17 per cent above the 10-year November sales average.

“We’re seeing steady demand in today’s market. Home buyer activity is operating above our long-term averages, particularly in our townhome and condominium markets,” Jill Oudil, REBGV president said.

There were 4,109 detached, attached and apartment properties newly listed for sale on the Multiple Listing Service® (MLS®) in Metro Vancouver in November 2017. This represents a 30.6 per cent increase compared to the 3,147 homes listed in November 2016 and a 9.5 per cent decrease compared to October 2017 when 4,539 homes were listed.

The total number of homes currently listed for sale on the MLS® system in Metro Vancouver is 8,747, a 4.3 per cent increase compared to November 2016 (8,385) and a 4.3 per cent decrease compared to October 2017 (9,137).

“While we’re seeing more listings enter the market today than we saw at this time last year, we have a long way to go before our home listing inventory rises back to more historically typical levels,” Oudil said.

The sales-to-active listings ratio for November 2017 is 32 per cent, which is up three per cent since September 2017. By property type, the ratio is 15.9 per cent for detached homes (up one per cent since September 2017), 36.4 per cent for townhomes (down six per cent since September 2017), and 67.8 per cent for condominiums (up seven per cent since September 2017).

Generally, analysts say that downward pressure on home prices occurs when the ratio dips below the 12 per cent mark for a sustained period, while home prices often experience upward pressure when it surpasses 20 per cent over several months.

The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $1,046,900. This represents a 14 per cent increase over November 2016 and a 0.4 per cent increase compared to October 2017.

Sales of detached properties in November 2017 reached 841, a 31.8 per cent increase from the 638 detached sales recorded in November 2016. The benchmark price for detached properties is $1,608,000. This represents a 6.1 per cent increase from November 2016 and a 0.1 per cent decrease compared to October 2017.

Sales of apartment properties reached 1,508 in November 2017, a 25.7 per cent increase compared to the 1,200 sales in November 2016. The benchmark price of an apartment property is $648,200. This represents a 23.9 per cent increase from November 2016 and a one per cent increase compared to October 2017.

Attached property sales in November 2017 totalled 446, an 18.6 per cent increase compared to the 376 sales in November 2016. The benchmark price of an attached unit is $805,200. This represents a 17.9 per cent increase from November 2016 and a 0.3 per cent increase compared to October 2017.

Click here to download the November 2017 stats package