![\"End-users](\"https:\/\/www.livabl.com\/articles\/wp-content\/uploads\/2022\/03\/pre-con-investors.jpg\")
<\/a>Photo:\u00a0Aitor<\/a>\u00a0\/ Adobe Stock<\/em><\/p>\nIf you\u2019re looking to buy a new construction home in the Greater Toronto Area right now, you might run into a lack of standing inventory.<\/p>\n
Still, that doesn\u2019t appear to be slowing down motivated purchasers just yet as investors and end-users \u2014 those who intend to live in their pre-construction property \u2014 transact in this year’s busy marketplace<\/a>.<\/p>\n The GTA\u2019s pre-construction market is in short supply of inventory. According to the latest information<\/a> from the Building Industry and Land Development Association (BILD), remaining inventory for single-family homes dropped to a record-low of 550 units in January, well below the 15,000-plus units on average for the 2000 to 2009 period.<\/p>\n Condo inventory increased slightly compared to the previous month up to 8,333 units, which equals just 2.9 months of inventory based on average sales for the last 12 months. Meanwhile, a record 2,274 new condominium apartment units were bought in January, the highest number of new homes sold in the month of January in 19 years.<\/p>\n\n \u201cI would say in my career of nine years being active in the pre-construction space, this is probably the period of lowest standing inventory that I\u2019ve ever seen, maybe only rivaled by 2016 and 2017 when the resale condo market ran really aggressively and then all of that inventory from previous launches was absorbed by the market,\u201d said Jordon Scrinko, founder of Precondo<\/a> and a sales representative with Cloud Realty Brokerage, who mentioned that there\u2019s \u201cno question,\u201d that there are more active buyers.<\/p>\n Scrinko explains that it has been \u201cincredibly difficult,\u201d to find inventory in projects that launched a year or more ago that isn\u2019t above the $1 million mark, an attractive price range for end-users and investors. As a result, pre-construction purchasers can find themselves competing in new launches and worksheet lotteries where there may be far more applicants than the number of units available in a development.<\/p>\n \u201cAs a new investor or even an end-user looking to get into pre-construction specially below that $1 million mark, there\u2019s almost no standing inventory, and so they\u2019re kind of relegated to doing new launches,\u201d said Scrinko.<\/p>\n While low inventory may be on people\u2019s minds now, investor outlooks don\u2019t fluctuate often with respect to different market cycles and trends, said Simon S. Mass, CEO of The Condo Store<\/a>.<\/p>\n Although the current situation may reflect shallow inventory levels, this could change in the near future with respect to reporting on inventory as news, Mass said. While a minor increase in investors into the market could be a source of higher activity and lower inventory, experienced investors can navigate these conditions.<\/p>\n \u201cActivity levels tend not to stray from a consistent plan within each investors\u2019 portfolio, however, what you are seeing is a small uptick in the quantity of investors entering the space,\u201d he said. \u201cSo that alone could lead to the low inventory and higher activity numbers, but an experienced savvy investor will manage the circumstance \u2014 not overextend to projects that don\u2019t fit their criteria because interest rates are low currently, or other specific situations.\u201d<\/p>\n With the average price of a resale Toronto home now well over $1.3 million<\/a>, it\u2019s no surprise that buyers are looking for other options.<\/p>\n Scrinko notes that more end-users are getting into pre-construction. Typically, 60 to 80 per cent of pre-construction purchases are investors, but Scrinko says that last year, his team experienced the highest percentage of end-users they’ve ever sold pre-construction to. In 2022, this trend is continuing to play out.<\/p>\n \u201cWhat we\u2019re seeing for downtown is more end-users than we would normally see because the resale market has literally no inventory. There\u2019s less than one month of inventory in the resale market, which is the lowest it\u2019s been in years,\u201d said Scrinko. \u201cAnd so a lot of end-users are just purchasing pre-construction instead.\u201d<\/p>\n The percentage of end-users versus investors varies by product type. Some projects may be made up of 80 to 90 per cent of investor buyers, while other developments could gain 90 per cent end-users. Scrinko also notes that there isn\u2019t just one type of end-user. Some are upsizers, downsizers or first-time home buyers who are getting financial support from their parents.<\/p>\n \u201cWith the pricing you are seeing in the resale segment, it only makes sense that buyers would look for a better option, and pre-construction is a totally different asset that is getting much more attention recently, and rightfully so from our perspective,\u201d said Mass.<\/p>\n \u201cYou are seeing more of everything in the sector, whether that is a first-time investor or end-users. There is no doubt that the experience is different and one that people \u2014 once into the process \u2014 find very smooth and consistent, which creates repeat buyers,\u201d he added.<\/p>\n When it comes to investing in real estate, Canadians are generally feeling optimistic this year.<\/p>\n A recent global survey<\/a> conducted by Finder.com with 1,200 Canadian users found that 28 per cent of participants considered property to be the second-best performing investment in 2022. This is only a few points below holding onto assets such as cash (33 per cent), and ranks higher than cryptocurrency (15 per cent) and stocks or shares (11 per cent).<\/p>\n For investors looking to make moves in the pre-construction market, Mass explains that gentrified and newer neighbourhoods are hot right now as these areas are seeing lots of building activity and higher return percentages. At The Condo Store, analysts are particularly drawn to opportunities in Toronto\u2019s Junction neighbourhood, The Queensway and Oakville.<\/p>\n A lot of investors, especially first-timers, are focused on the suburban condo markets like Hamilton, Scarborough and Kitchener, said Scrinko. Part of this is due to downtown rental prices that have suffered lately. Condos in the suburbs that have a lower price per square foot compared to their downtown counterparts are likely to have better cash flow down the line. The urban exodus movement, which has seen residents migrate to the outskirts of the GTA, is another factor capturing investors attention.<\/p>\n “I think the urban exodus is a huge part of it as that sentiment shifts has resulted in a lot of investors looking [in the] outskirts,” said Scrinko. “A lot of people just want to invest in whatever the hottest performing segment of the market is, and right now that is the 905s, not the 416s, but we\u2019re starting to see a shift now. Downtown condos are really running in the past two or three months.”<\/p>\n With an increase in pre-construction buyers, Mass said that this will allow more projects to come online in response to demand, which will also ensure that there are a \u201csteady number,\u201d of rental units in Toronto.<\/p>\nResale challenges push end-users into pre-construction<\/h3>\n
<\/a>Photo:\u00a0artemzavarzin<\/a> \/ Adobe Stock<\/em><\/p>\nInvestors look to suburban markets, newer neighbourhoods<\/h3>\n
\r\n SEE ALSO:<\/span>GTA home prices have increased more than 450% over 25 years: RE\/MAX Canada<\/a><\/strong>\r\n <\/div>\nDemand for pre-construction could drive building boom<\/h3>\n