Are Presale Condos Right For You?

Updated by Mike Stewart Realtor on February 18. 2025

The Pros And Cons Of Buying Presale Condos In BC

The Pros And Cons Of Buying Presale Condos In BC – This is a very good question to ask yourself before you get started with the purchasing process.

In BC real estate, presale condos, also known as pre-construction condos or off-plan properties, offer a unique opportunity for buyers to invest in a unit that is yet to be built. This method of property acquisition is particularly prevalent in many global markets, including British Columbia (BC), where it is commonly referred to as a presale. While investing in presale condos in BC presents several benefits, it also comes with certain risks. This article will delve into the pros and cons of investing in presale condos in BC.

Pros of Buying Presale Condos in BC

1. Price Lock-In: One of the primary advantages of investing in presale condos is the ability to secure today’s pricing for a property that will be completed in the future. In a rising real estate market, this can be a significant benefit, allowing investors to lock in a property at a potentially lower cost than its future value.

2. No Immediate Mortgage Requirement: When investing in presale condos in BC, it is strongly advised to get a mortgage prequalification. However, this is not a requirement when buying a presale, providing flexibility for investors who may not be ready to secure a mortgage immediately.

3. Freshness: There is a unique appeal to being the first occupant of a property. Many investors and potential tenants appreciate the allure of a brand new property that no one else has lived in before.

4. Reduced Maintenance: The freshness of presale condos also means fewer maintenance issues, repairs, and mechanical failures that are common with older, existing condos. This can save investors time, money, and stress in the long run.

5. Choice: One of the unique benefits of investing in presale condos is the ability to choose the exact suite in a development. This is a distinct advantage over buying existing properties, where investors can only purchase what is currently for sale.

6. Potential for Customization: Some presale projects, especially luxury developments, may allow investors to customize floor plans, appliances, finishings, and more. This provides an opportunity to create a space that truly reflects the investor’s style and needs.

Cons of Buying Presale Condos in BC

1. Construction Delays: One of the potential risks of investing in presale condos is construction delays. If the project is delayed beyond the agreed end date in the contract, the project may be cancelled, and deposits returned without interest to the investor.

2. GST on New Homes: Unlike existing properties, new homes in BC are subject to a Federal Goods and Services Tax of 5%. This additional cost should be factored into the overall budget when considering investing in presale condos.

3. Potential Higher Cost: New properties often come with a higher price tag than existing ones. While the newness of a presale condo can be appealing, it often comes at a higher cost. Investors should carefully consider their budget and the potential return on investment when deciding to invest in presale condos.

4. Changes to Floor Plans: Due to unforeseen circumstances, there may be changes to floor plans. This can be disappointing for investors who have chosen a specific unit based on the original floor plan.

5. Real Estate Market Fluctuations: The real estate market is always changing. While the BC real estate market has been on the rise, it does not always rise, and when prices fall, investors are still legally required to complete on a presale purchase. This can be a significant risk for investors, particularly in volatile markets.

6. Mortgage Uncertainty: Most banks will not give a mortgage preapproval on a presale at the time of purchase. Lenders may give a probability of granting a mortgage on the completed condo. Some lenders will offer a long-term presale mortgage preapproval, but this is not common. This uncertainty can be a significant consideration for investors who need to secure financing to complete the purchase.

Buying presale condos in BC offers a unique opportunity to purchase a property before its construction is completed. While this comes with its own set of benefits, it also carries certain risks.

Therefore, it is crucial for potential investors to conduct thorough research and consult with professionals before making a decision.

As the market for presale condos continues to grow in British Columbia, understanding the ins and outs of these transactions becomes increasingly important for investors.

Should you have any questions on the presale condo buying process in BC, please do get in touch with us for advice.

Investment Strategies for Presale Condo Buyers in BC

Investing in a presale condo can be a lucrative opportunity, but success requires a strategic approach. Here are some key investment strategies to consider:

Research the Developer’s Track Record

Investigate past projects, completion timelines, and customer reviews.
Verify if the developer has a history of delivering on promises and avoiding legal disputes.

Assess Market Trends and Demand

Look into the supply and demand of presale condos in your target area.
Consider neighborhoods with upcoming infrastructure projects or transit expansions.

Understand the Deposit Structure

Most presale condos require staggered deposit payments (e.g., 5% upon signing, another 5% in 12 months, etc.).
Ensure you have the liquidity to meet these commitments without financial strain.

Know the Risks and Exit Strategies

Market downturns and project delays can impact investment returns.
Have a backup plan in case you need to assign (sell) the presale contract before completion.

Consider Rental Potential and Future Demand

Analyze rental yield projections in the area.
Check local rental regulations and short-term rental restrictions.

How to Assess Developer Reputation Before Buying

Choosing a reputable developer is crucial to minimizing risk when purchasing a presale condo. Here’s how you can vet them effectively:

Check Past Project Success

Research completed developments and visit them if possible.
Speak with past buyers about their experience with the developer.

Read the Disclosure Statement

Developers must provide a disclosure statement outlining project details, timelines, and potential risks.
Review it thoroughly to understand your rights and the developer’s obligations.

Look for REDMA Compliance

Under the Real Estate Development Marketing Act (REDMA), developers must register and disclose critical information.
Ensure the project meets REDMA regulations before committing.

Check for Complaints and Legal Issues

Search for lawsuits or complaints filed against the developer.
Look up consumer reviews on forums and real estate websites.

Understanding the Deposit Structure in Presale Purchases

Presale condo deposits are structured differently than traditional real estate purchases. Here’s what you need to know:

Typical Deposit Schedule

5% at signing
Additional 5-10% within 6-12 months
Final 5-10% upon project completion

Where Is Your Deposit Held?

Deposits are typically held in a trust account, providing some protection if the project is canceled.

Risks of Losing Your Deposit

If you fail to secure financing by the completion date, you may forfeit your deposit.
Ensure your mortgage pre-approval extends to the project’s estimated completion date.

Can You Get Your Deposit Back?

Under REDMA, buyers may have a rescission period where they can withdraw without penalty.
If the developer fails to meet conditions outlined in the disclosure statement, deposits may be refundable.

The Role of REDMA in Presale Transactions

The Real Estate Development Marketing Act (REDMA) is a critical regulation that protects buyers in BC’s presale market. Here’s why it matters:

What Is REDMA?

A BC law that regulates presale real estate transactions.
Ensures developers disclose all material facts about a project.

How Does It Protect Buyers?

Requires developers to provide a detailed disclosure statement.
Buyers can rescind their contract within 7 days of receiving the disclosure statement.

What Happens If a Developer Fails to Deliver?

If a project is canceled, deposits must be returned to buyers.
Developers can face legal consequences for failing to comply with REDMA.

Assignment Sales: Can You Sell Your Presale Before Completion?

Presale assignment sales allow buyers to sell their contract before a condo is built. Here’s how it works:

What Is an Assignment Sale?

A legal transfer of the original buyer’s presale contract to a new buyer before project completion.

Why Would Someone Assign Their Presale?

To cash in on price appreciation before completion.
To exit the contract due to financial or personal reasons.

What Are the Fees and Restrictions?

Developers may charge an assignment fee (often 1-5% of the purchase price).
Some contracts prohibit assignments or require developer approval.

Tax Implications

Profit from an assignment sale may be subject to capital gains tax.
Consult a tax professional to understand your obligations.

Buying Presale Pros and Cons FAQ’s

What are the essential tips for investing in presale condos?

Research the developer’s history and project track record.
Understand the deposit structure and financing options.
Analyze the market trends and rental potential.
Be aware of assignment restrictions and contract clauses.

How can I assess the potential return on investment for a presale property?

Look at historical price appreciation in the area.
Compare rental yield projections with purchase price.
Consider resale value and demand trends in the market.

What legal protections are in place for presale condo buyers in BC?

The Real Estate Development Marketing Act (REDMA) regulates presale transactions.
Buyers have a 7-day rescission period to cancel the contract.
Developers must disclose all material project details before signing.

Are there additional taxes or fees when purchasing a presale condo?

GST is usually payable on new presale condos.
Some municipalities have additional property transfer taxes or speculation taxes.

Can I assign my presale condo contract to another buyer?

Many developers allow assignments, but they may charge a fee.
Assignment sales require developer approval and may be subject to restrictions.

What happens if a developer goes bankrupt before completion?

Deposits held in trust may be refunded.
If REDMA regulations were not followed, legal action may be necessary.

How long does it take for a presale condo to be completed?

Completion timelines typically range from 2-5 years.
Delays can occur due to permit issues, labor shortages, or market downturns.

Is buying a presale condo riskier than purchasing a resale unit?

Yes, as buyers are committing to a property that doesn’t yet exist.
Market fluctuations, developer delays, and contract terms can impact the final purchase outcome.