Nothing Illegal About Taking a Risk
This article is absolutely preposterous. The buyers of prebuilt condos wait 5-6 years for a building to be completed. They risk large amounts of money as down payments based on the little information provided by the developer at this early stage. The contracts are pro developer since so much is unknown at this early point of sale. There is absolutely nothing nefarious about risk takers trying to earn a profit six months before a building is completed. There is nothing illegal or criminal about any of this. The price paid at the time of sale is market value.
Developers are not idiots and they give nothing away. The passage of time, namely five to six years, is the reason for the increases in value. In Toronto that five to six years can mean an increase of $100 – 300 per square foot depending on the market conditions over that period. It just so happens that 2016 saw a huge price jump that rewarded recent buyers. It is certainly not guaranteed. Buyers who resell their contract are just selling the unit at the prevailing market price. They are not contributing to price inflation. They are selling at market price.
Why is this a bad thing? We live in a free market economy and a democracy. The tone of this article is very accusatory as if someone is being sneaky and breaking the law. Obviously, taxes must be paid but outside of that who is being harmed? Realtors must disclose their involvement in a sale as per the act that governs them. The moaners who claim that they are being shut out from an opportunity are Monday morning quarterbacks. Sure, after five to six years of waiting and what looks like an easy $200k windfall it is nice to say you would have bought a suite. The reality is people don’t typically do it because it is not a guarantee. There is plenty of risk involved.
I have been selling just this kind of real estate for 23 years. First as a broker then as a broker and developer. I have handled tens of thousands of presales at over 120 projects. Selling these presale units is very difficult. Buyers are impossibly nervous, suspicious, and ultimately most will ‘rescind’ or change their minds. In the end brokers and developers focus on the buyers that will buy quickly without issues or problems. If you are one of those buyers it is easy to find a unit. 95% of interested parties will never buy a home on paper and then wait five to six years to move in. I know this to be a fact based on the vast number of units and projects I have sold. Developers must sell 70% of a building before they can obtain construction financing and this forces developers to focus on investors and investor style suites. If Canadian banks allowed developers to build on spec it would greatly change the system. Good luck with that.
Flipping of condo units by insiders fuels hot Vancouver market | The Globe and Mail