Homeownership remains out of reach for many Canadians \u002D\u002D and the crisis looks to be getting worse.
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Pre-sale condo units allow buyers to negotiate a future-dated purchase price, with a 20% down payment and a pre-approved mortgage. Buildings are often years away from occupancy , followed by a closing date when ownership is ultimately transferred and buyers “close” on their individual units. It is at this point in the transaction that buyers must qualify for a second time under Canada’s mortgage regulations.
Pre-sales are not without risk for the developer — developers absorb fluctuations in material prices and construction costs. Rapidly rising interest rates, however, fundamentally change the framework of the agreement for the developer and the purchaser, jeopardizing individual deals, and stifling the industry’s appetite to build.Article content
This will not lead to more housing being built as developers and purchasers will be cautious of the fluctuating market — and ultimately lead to less affordable housing in the province as planned new builds are put on hold.Article contentDon’t be confused by the construction activity you see today — year-over-year sales volume of pre-sale units is down more than 50%, with overall condo sales down 47% according to Toronto Region Real Estate Board figures comparing 2021 to 2022.
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