If you’re considering buying a condo in Toronto, now is the perfect time to consider pre-construction options. As prices for existing condos drop, developers offer attractive incentives for pre-construction purchases, including free parking and rental guarantees, making it an ideal time for buyers to secure excellent deals.
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Whether you’re an investor seeking long-term growth or a first-time homebuyer looking for flexibility, pre-construction condos offer a unique opportunity to enter the market on favorable terms. We spoke with real estate expert Monique Jagirdar from eXp Realty to get her insights into the pros and cons of buying pre-construction.
At the height of the COVID-19 pandemic in 2020, Toronto’s real estate market saw a dramatic shift, particularly in pre-construction sales. For many agents, including Jagirdar, the lockdown period was a time of adaptation and growth. “I transitioned into pre-construction right in the middle of COVID,” she recalls. With sales offices closed, Jagirdar relied on her research to navigate the market, eventually building solid relationships with developers when things reopened.
Pre-construction sales during this time were highly competitive, like trying to get tickets to a popular concert. “Buyers would line up at sales centers, and staff would take down their names in the order they arrived,” Jagirdar says. “With limited units available, only the first few in line could secure a unit, leaving the rest to wait for the next release, which could take weeks or even months.”
During the pandemic, the demand for pre-construction condos skyrocketed. In an October 2020 report by Urbanation, 6,694 new condominium units were launched for pre-sale in Q3, setting a record for third-quarter launches and reflecting a 162% increase compared to the 2,556 units launched in Q3-2019.
“Incentives were incredible, and buildings sold out in less than a week.” This frenzy led to buyers lining up days in advance, with some even camping outside sales offices, particularly for high-demand townhomes and detached homes across the Greater Toronto Area.
That’s an entirely different picture than today’s. By comparison, as reported by Urbantion in April 2024, the new condominium market in the Greater Toronto Hamilton Area recorded 1,461 sales in Q1-2024, marking the lowest quarterly total since Q1-2009, when only 884 sales were made during the Global Financial Crisis.
Why Buy Pre-Construction?
One of the most appealing aspects of buying pre-construction is the incredible incentives developers currently offer. “There are some incredible incentives right now,” says Jagirdar. “Builders offer up to $100,000 in discounts, extended deposit structures, and perks like free parking and storage lockers. It’s a great time for buyers to take advantage of these deals.” With the real estate market slowing down, builders are motivated to move units, which puts you in a solid position to negotiate.
Additionally, buying pre-construction allows you to lock in today’s price for a property that will likely appreciate over the coming years. When the condo is completed, you could be sitting on significant equity. Jagirdar notes, “You’re locking in your purchase at today’s price, and with extended timelines before the mortgage kicks in, it’s perfect for those who want to save up while waiting for the unit to be ready.”
Understanding Deposit Structures: Flexibility That Works for You
One of the key benefits of pre-construction condos is the flexibility of deposit structures, which is particularly helpful for first-time buyers. Jagirdar explains, “While the total deposit is typically 20%, it’s broken down into more manageable payments. You might pay an initial deposit of $15,000 to $25,000, then another 5% or 10% of the purchase price 30 days later.” The remaining balance is due at occupancy, which could be several years—sometimes as late as 2027 or 2028.
“This gives buyers plenty of time to save and manage their finances,” Jagirdar says. “Some developers even offer 5% payments spread out over several intervals, like 30 days, 180 days, and more.” These extended timelines make pre-construction an attractive option for buyers who need flexibility in how and when they make their payments.
Assignment Sales Are a Smart Way to Find a Bargain
Assignment sales are worth exploring for those looking to score an even better deal. An assignment sale happens when someone sells their pre-construction contract before the building is completed. “Many buyers over-leveraged themselves during the hot market and bought multiple units. Now, they can’t close and are eager to sell their contracts to avoid losing their deposits.”
As a result, the market is flooded with assignment listings, creating a rare opportunity for buyers to negotiate a discounted price. “You can find some great deals with assignment sales because sellers are motivated to offload their units,” Jagirdar says. “They might be willing to cover additional costs, like assignment fees or closing expenses, just to make the sale happen.” While you’ll still need to account for closing fees and development charges, the savings from buying through an assignment sale could easily outweigh these costs.
Is Now the Time to Jump into the Pre-Construction Market?
The current pre-construction market is a goldmine for smart buyers. “Builders are eager to sell units right now, which gives buyers a lot of negotiating power,” Jagirdar says. Developers offer discounts as high as $100,000 and extended deposit structures that give you more financial flexibility. With these incentives, you can lock in a property at today’s prices while benefiting from flexible payment terms. “In a few years, when the market picks up again, you’ll likely see your property appreciate significantly in value,” she adds.
The pre-construction market has long been a favorite type of investment for people looking to buy their first homes or expand their real estate portfolio. “One of the biggest advantages for investors is that you don’t need a mortgage until the building is completed. This could be five to seven years, giving them time to plan their finances while the property value appreciates.”
But it’s not just investors who are taking advantage. “For first-time buyers, the flexible deposit structures and extended timelines make pre-construction very attractive,” Jagirdar says. “You’re not pressured into making large payments right away, and you have time to save up while securing a home at today’s price.”
Toronto’s pre-construction market is brimming with opportunities, offering competitive prices, flexible payment options, and eager sellers. “Whether you’re an investor aiming to grow your wealth or a first-time buyer seeking your dream home, now is an excellent time to explore the pre-construction market,” she explains.