Should I Buy Brand New Home?
With the amount of cranes that you see around Vancouver it is no wonder that new developments are coming up almost daily. Real Estate has quickly become the number one industry in Vancouver surpassing the $38 billion mark. Quite a jump when you consider B.C.’s oil and gas industry to be worth $6.9 billion and B.C. forestry industry to be worth $1.8 billion. What does that mean for Real Estate investors or individuals looking to buy a home? It means that there will likely be a lot of new development and depending on the time of the year you could have some options. Currently, we are in a sellers market which means that the demand far exceeds the supply however things typically go in cycles and as developers keep building this should eventually even out.
What is a Presale?
Pre-sales are when a developer sells homes before they are built. Depending on the size and scope of the project developers need to sell a certain amount before they can acquire the proper financing to build the project. Townhomes are usually done in smaller projects and may only sell a year or 2 before they start the build whereas a larger condo downtown may start selling 3 years before completion.
There are different stages of pre-sale. Generally the opening week they invite select Realtors to come preview at the “Agent Preview”. They do this to create a buzz and to inform the agents that work in the area about the project so that they can relay this information to their client base. From here they may release some to agents only or friends and family before launching it to the public. Depending on the size there may be lineups to get in or they may sell quietly one at a time until the entire project is sold out. This may even go on until completion. For the past 5 years we have seen prices generally increase the closer you get to completion. This is due to the fact that prices have gone up each month but also as a result of buyers being able to physically see the developments once they get closer and closer to completion.
Benefits of Buying Presale?
- Money – If you get in early enough you can typically save some money, partly because you are buying at today’s prices and once it’s completed it will have likely appreciated but also because developers must price projects competitively if you are only buying off a floor plan. Most buyers would rather be able to walk into their home before putting in an offer and for this reason prices need to be reasonable.
- Time – If you are expecting an increase in your family size or are planning for a move down the road but you aren’t quite ready buying pre-sale could be a good way to put away some money now and move in once you are ready. It enables you to prepare and generally give you more time to plan for the move.
- Warranty – 2-5-10 warranty is in place on all new homes in Vancouver. 2 years warranty on parts and labour inside your home, 5 years warranty on any envelope issues and 10 years on the structure of the home. Typically the 2 year warranty gets used the most frequently.
- Bright and Shiny – Often once buyers see a brand new home it’s hard for them to look at a home that may have an outdated kitchen, bathroom or flooring. You get the most modern look and don’t have to worry about any renovations.
- Customizations – Depending on the developer you may be afforded the option to make some customizations. Colour scheme, flooring, appliances and lighting are typical options that you can choose to upgrade…. If the developer allows it!
Downside of Buying Presale?
- Time – As much as this can be an advantage it can also be a curse. You typically have to wait and if you are in a pinch and need to move then this can be a challenge. Developers also frequently underestimate the timeline to build. This can leave you waiting for weeks or months before you can move in. Plan accordingly!
- GST – Unfortunately the government needs to get paid and they charge all purchasers and additional 5% GST when they buy from a developer. First time buyers may be eligible for a partial exemption however for higher price points this is unlikely.
- Guess work – When you cannot physically see and feel your home it takes a bit of trust and guess work to understand how it will feel once it’s actually completed. It’s helpful to work with an agent who has experience in this field to lend a hand in explaining floor plans and helping you pick out finishes.
- Risk – Signing a contract always comes with some risk but more risk is involved if you buy longer out. If you were to lose your job or have an emergency and your “pre-approval” no longer was in place you may need to come up with more money in order to complete on the property.
Buying presales are not for everyone but they can be great options for the right buyer. There are always new projects underway and if you would like to receive more information on any current or upcoming projects just drop us a line. We stay current on the happenings in the area and would be happy to help you along the ever changing way.