On today’s show we are talking about a shadow market that appears in the grey zone of the real estate market.
When a condo developer launches a new building, you often get speculators who make purchase commitments on newly released units. They believe these first units released into the market are the lowest price point and that all future sales for those units will be at higher prices. It is true, that many condo developers do indeed have a price escalation built into their pricing model. Buying at the very start of a project on the first of sales guarantees you the lowest price. In a world where prices only increase and never decrease, this is a great strategy.
Fast forward to 2022. There are a number of properties that are newly under construction, where the buyers purchased in 2018, 2019, and 2020. The market conditions have clearly changed and interest rates are much higher than at any time in the past decade. These speculative buyers had no intention of ever having to close on the purchase of these new units.
This is uncharted territory for buyers who never expected to qualify for a mortgage on these properties.
Host: Victor Menasce