I’ve been wanting to write this post for a long time. It seems I’m constantly being asked questions about remaining inventory in new condo developments. Are these units really “leftovers?” When it comes to pricing, is it true that the earlier you purchase pre-construction, the better? And how much value do new units retain after a project has launched?
If you’ve ever weighed the pros and cons of investing in a new condo after it’s launched, read on to learn more.
Are inventory units just “leftovers?”
Do you think of remaining inventory as the suites that nobody wants? If so, consider this: developers don’t always make all of the units within a project available at the same time. In some cases, they release new suites weekly and even monthly after an initial launch.
Now onto what most investors ask me about first: pricing. Many buyers assume they’ll only find good prices during a project’s initial release. But is this true?
Conventional wisdom says that units are priced at their lowest in a building’s earliest stages, when only friends and family members of the developer have the opportunity to buy. From there, real estate agents are given access in phases, before (finally) the entire project is released to the public. According to this line of thinking, prices go up during each phase.
It’s true that pricing tends to follow the pattern described above. But it’s not as cut and dried as you might think.
Contrary to popular belief, prices don’t always go up right away after launch. Developers will sometimes keep them the same for up to about six months afterward. This is important to remember, given how quickly the market moves in Toronto. A sum of money that seems high today could very well constitute a great deal six months from now.
The value of waiting
When it comes to remaining inventory, a lot of buyers focus on what they see as the potential drawbacks. So when one of my clients is considering this type of purchase, I advise them to think about the pros as well.
With inventory units, sometimes you even get the opportunity to see what you’ll be purchasing before you buy. This usually happens when a project is nearing completion. If you’re the kind of person who takes a hands-on approach to your investments, you might prefer viewing a new unit before making a commitment.
It’s also worth noting that there are times when waiting can lead to a better deal. By the time tenants have started moving in, developers are often motivated to sell their remaining suites. As a result, they sometimes implement incentives such as cash back on closing or free parking.
Many buyers see incentives or added offer and assume that the developer is desperate to unload a unit. But the truth is, deals like these don’t make suites any less valuable. In fact, they can lead to major bargains—so it’s definitely worth keeping your eyes open.
Don’t forget: you may also get to put down a significantly smaller deposit for an inventory unit than you would have during early pre-construction.
Looking past the label
Often, there’s a lot of attention-grabbing marketing that goes into the launch of a new development. Sometimes the hype is deserved. But the mistake many buyers make is assuming that everyone has to be talking about a building in order for the suites inside to be considered valuable.
The fact is, inventory suites can offer incredible value—as can units in buildings that launched six months or even a year ago. A lot of times, developers set their prices higher than those they find in neighbouring buildings simply because their units are newer. But that doesn’t make the units in older buildings any less valuable.
My point isn’t that it’s a bad thing to purchase a pre-sale unit in a building that’s generating a lot of buzz. I’m just saying that a suite isn’t a good investment simply because it’s brand new. Conversely, remaining inventory and units in older buildings aren’t bad investments just because they’ve been around longer.
Part of investing wisely is seeing beyond marketing tactics. Platinum pricing can be great in the right situation, but don’t jump at the chance to get it if it means buying a unit that doesn’t meet your needs. Focus on the factors that matter—like price per square foot, layout, size of the unit, and location.
An experienced real estate agent who knows both the pre-construction and resale condo markets can help you find exactly what you’re looking for—whether it’s the perfect place to live, a great investment, or both.
Looking to buy a loft in Toronto? I can answer your questions. You can either call/text me at 416-500-5360 or send me an email at rashid.notash@rogers.com and ask away!
