For those of you who watched the CTV news story on Friday February 13, 2009 - you saw a story about buyer's trying to pull out of pre-purchase contracts as now that they are taking possession of their units, the values have gone down significantly. Read/Watch
A story like this is definitely not a surprise - though when watching the report you need to take a few things into consideration.
Real Estate is a long term investment - aside from very short and small pockets of the market does it pay off in the short term. Each one of these condo buyers can make their investment back - if they hang onto the property for 2 to 5 years. Perhaps they should put a tenant in it?
When you pre-purchase by 12 to 24 months you are really taking a risk. Sorry to say - during the height of the real estate market in 2006 and 2007 - it was very evident a correction would take place over the next couple years. History does not lie - I say buyer beware and you should have known the inherit risks.
2 years ago, we were seeing the complete opposite story being run - it was the builder who was trying to get out of contracts because the values of the condos being pre-sold had gone up by 20+%. We had buyers screaming unfair. Now we have builder’s screaming unfair as the buyer's try pull out of contracts - works both ways!
Are the prices of these newly constructed condos going to come down? Yes. Will it drive the prices down further in the re-sale market? I doubt it - the new condo’s are still priced much higher than the re-sale market - they have a long way to go to catch up. What will a buyer choose? Newly renovated condo at 1050 sq.ft. at $250,000 with condo fees at $300 or a brand new condo of the same size for over $300,000 with condo fees over $400 per month? That is a significant difference and in my opinion an easy choice to make!