Many buyers in Toronto are choosing to purchase condos pre-construction, rather than buying a property that already exists. There are clear advantages to this – your home will be brand new and filled with the most modern, upgraded amenities and finishes, and you often get more value in terms of price per square foot, making it a worthy investment.
However, there are several other factors that differ between buying pre-construction and buying resale that you should be aware of.
Here are five things you should know about buying a pre-construction condo in Toronto.
1. Changes are Likely
Although an estimated completion date will be provided, condos are rarely completed by this date, so it’s important to allow for the fact that it may actually be another few months, or even a couple of years later than expected.
Builders are able to delay completion for various reasons, and there’s also a chance that the developer may not sell enough units to be able to complete the project on time.
Once the property is completed it may not look how you expected – floors may have been added or subtracted, amenities may have moved, and layouts might have changed.
2. The Deposit
When purchasing a resale condo in Toronto, you will be required to pay a deposit which is generally 5% of the total cost. However, if you’re purchasing a pre-construction condo, you are generally required to pay a much higher deposit – often as high as 20%.
Often this will be paid in installments with a small amount due when signing the agreement and the rest staggered over several payments.
3. Harmonized Sales Tax (HST)
Unlike buyers of resale condos, purchasers of new condos will be required to pay HST. If you are buying the property to live there yourself, you may be eligible for an HST rebate.
However, if you are planning to rent out the condo, then you are generally not eligible for a rebate. This can be quite a confusing area, so it is advisable to seek legal advice in order to budget appropriately.
4. Condo Fees May Increase
All condo owners in Toronto are required to pay condo fees towards the maintenance of the building. In pre-construction condos, the fees are set prior to the building actually being built, at a time when the costs of running the building are unknown.
Therefore they are generally set very low, and condo owners can expect them to rise substantially (often 10-20%) within the first two years after completion.
5. Closing Costs
A number of closing fees apply to new condos which don’t apply to resale condos. This includes development and education costs, HST for appliances, and utility connection costs.
With recent increases in development fees in 2018, these closing costs may amount to around 2-4% of the price of the property, so it is important to have money set aside.
However, buyers should also keep in mind that they do generally get better value for money on pre-construction condominiums despite the extra costs involved.