The Benefits of Buying a Pre-Construction Home in Canada

In Canada, buying a pre-construction property means investing in a home that doesn't physically exist yet. You are essentially putting your money into a property based on the developer's plans and designs, and you won't see the finished product until it's completed. Just by that definition alone, the idea of buying a pre-construction property seems like a risky business. 

Yet, the number of pre-construction units under construction in Canada is expected to reach 277,000 in 2023, with investors being the majority of buyers. So why is that?

It's simply because pre-construction properties offer a clever way to sidestep the negative impacts of an uncertain housing market. As a solid investment opportunity, they provide potential for passive income and substantial capital growth. In this blog, we will go over the benefits of pre-construction properties so that you have a better understanding of what investing in them can do for your future.

Read More: Home Buying in Toronto: How Much Down Payment Do You Really Need?

You can ignore the current market cycle

Pre-construction properties in Canada take an average of 3 years to get completed. This is more than enough time for you as a homebuyer or investor to bypass any adverse circumstances, such as high rates of mortgage or housing market fluctuations. Additionally, pre-construction properties are generally more affordable than resale homes, which means that even if prices are on the upswing, you will still be paying comparatively less.

Another plus point of the construction timeline for pre-construction properties is that it allows you ample time to save for that 20% deposit. Unlike resale homes, where you would typically need to pay the full 20% deposit immediately, pre-construction developers offer a deposit structure that enables you to spread the same amount throughout the construction period. This flexible payment approach can ease the financial burden and make pre-construction homes more accessible to buyers.

You are protected

Let's say you buy a property through an open house, and just a few days after moving in, you discover defects like mould, irregular water supply, and more. What can you do now? Because the seller won't be returning to fix them, which leaves you with the burden of a hefty renovation cost.

In the case of pre-construction, you are protected from such mishaps. In Ontario, for example, most of the new homes sold in the province are covered by the Tarion Warranty Corporation. Tarion provides several warranties, including a one-year warranty for defects in materials and workmanship, a two-year warranty for defects in the building envelope, and a seven-year warranty for defects in the structure of the building. Almost all of the things that can go wrong are now crossed off the list simply because you chose to purchase a pre-construction home.

You will make a sound investment

According to a study by Altus Group, the average resale home in Toronto appreciated by 5.4% in 2022, while the average pre-construction condo for sale in Toronto appreciated by 13.2% in the same year. This suggests that pre-construction properties have a higher appreciation value than resale homes, and this is not without reason.

Pre-construction properties are extremely popular among investors as buyers can lock in a price before the property is built. Not to forget that most pre-construction properties are offered with incentives, such as discounts or free upgrades, which can further increase their value. Combine this with the possible renovations and changes you will make over your life in that home; the potential for future profit is sky-high.

You get a cooling-off period

Here's an intriguing fact: A recent survey by the Canadian Real Estate Board Association (CREA) revealed that about 28% of home buyers in Ontario felt they had overpaid for a house. Bidding wars and unconditional offers are common culprits behind this sentiment, often prevalent in resale homes. If you are tired of losing out on homes due to multiple bids and the pressure of unconditional offers, pre-construction might be the solution for you.

When you buy a pre-construction home, bidding wars are a thing of the past. You pay the listed price, and that's the end of it. In regions like Ontario, you also have the benefit of a 10-day cooling-off period, during which you can take the time to ensure you're happy with your purchase. As long as you adhere to the contract's terms, you can cancel your purchase within the cooling-off period and receive a full refund of the deposit if you later decide it's not what you expected. This level of security and flexibility makes pre-construction homes a more stress-free option for buyers. 

It is advisable to have a realtor by your side

The above-stated benefits of pre-construction homes tell you two things—One, these properties are highly lucrative in the future, and two, there is a lot more to the process of buying one than meets the eye. That is why we recommend getting in touch with an expert realtor who not only can help you understand the overall process but also read the fine print for you before you sign the dotted line.