First a quick summary of January:
- Median Condo Prices were a little lower than usual at $371,500.
- Supply/Demand ratio slipped a little lower towards Buyers Market.

We saw this issue coming... and now it's here. We've had many conversations with prospective Buyer's looking at new construction projects as if they're easy money when we felt they're more likely to take a loss on certain projects.

Back in 2007, new construction condos were less expensive than resale condos. That makes sense because you have to wait 3-4 years for your suite, buy on good faith from floorplans and put tie updown a 20% deposit vs 5% for resale. For those sacrifices, you deserve a lower price than a resale unit. Unfortunately, many Buyer's blindly jumped on the new construction bandwagon and assumed all projects were going to be profitable. Now those projects are completing and Buyer's are having a closer look at the numbers only to conclude there's no profit, or worse.

Want a specific example? One Buyer contacted us from Pier 27 who bought their suite in late 2007... almost 7 years ago. She bought a 1 bedroom plus den, 680 square feet for $498,000 which works out to about $727 per square foot. Back in 2007, that was too much money to pay for a suite with a poor view, looking right into a neighbouring tower... and it's still too much today. She asked us to tell her how much we thought her suite was worth. We reviewed other suites for sale in the building and surrounding area and felt her suite is worth $470,000-$480,000 which leaves a loss of about $25,000. Selling her suite using a real estate agent would incur about $25,000 worth of fees, she still has to pay closing costs with the developer... likely another $15,000. In the end. Most likely, she'll be in the red for around $65,000 if she closes with the developer and sells using an agent. I counted 20 assignments for sale just on Kijiji for Pier 27 (Feb 06, 2015).

I've been in other sales sites where the Representative for the developer kindly explains the prices reflect the 'future value' of the condo, not today's value. I would reply "So there's no profit for my client then." to which they would dissapointingly glare as if I was being uncooperative.

Some new construction has been profitable, but they're usually the value oriented buildings as opposed to the luxury market. The best way to decide if new construction will be a good investment is to look at the surrounding resale condo values and decide how much of a premium you would pay vs the resale competition.

So be cautious, well informed, know your numbers and get a professional second opinion.

An educated, professional real estate agent will net you more money. We're always happy to meet you for a coffee and discuss your real estate ambitions.