Hey Flaherty! If You Want To Reign in the New Condo Market, STOP ASSIGNMENTS!
I hate assignments. I think they have the potential to destroy the Canadian economy. Allowing buyers of new condominiums to flip or assign their contracts prior to owning and closing on the commitment, breeds speculation. Speculation is bad. Unchecked, it always leads to the ruination of a market.
Currently, Toronto`s new condo market is healthy, and while 50% or more of the market is represented by investors, we have little speculation. In reality, at my last completed development, out of 103 units, in the end, just 6 were assigned. Most investors choose to close and rent the unit. This of course is excellent for the city as our tight rental market gets some needed inventory. At issue is the potential for disaster. Most buyers now ask for an assignment clause and many developers grant them. While few investors actually use their right to assign, tens of thousands could if they chose to.
The assignment clause provides an “out” for an investor to take if the shit ever hit the fan. We want to prevent that option. We want to protect our real estate economy from speculation and ensure that all condo buyers close on their contracts. If they wish to sell once they own the unit, they can. Let’s make any assignment of a contract on an unbuilt or uncompleted home illegal. Let’s stop this practice.
While a law such as this may slow down the sale of new condos, it will also ensure that buyers intend to close, and that they have the funds and capacity to close. We will likely see a slowdown for a short period of time and then investors will step back in and buy as investors.