How did we get right here, the place condominium costs have dropped?
Nation-wide, condominium costs spiked by over 29% between January 2021 and April 2022, based on the Canadian Actual Property Affiliation (CREA). Because the peak in spring 2022, condominium costs have fallen 12%. The decline within the Better Toronto Space (GTA) has been much more pronounced, with CREA reporting condominium costs down 19%.
A Toronto condominium purchaser who purchased in spring 2022, on the peak benchmark value of $730,500, might have put down as little as 5%, or $36,525 for a downpayment. The present benchmark condominium value of $593,000 (as of April 2025) implies that preliminary deposit plus greater than one other $100,000 of worth has been worn out. Even when the customer nonetheless needed to shut on the acquisition, their chosen lender would possibly not wish to finance it.
What choices do you could have when you’re unable to shut in your pre-construction condominium? Let’s take a look at totally different situations.
What occurs when you promote your condominium at a loss
To find out potential financing, lenders usually use a property’s appraised worth at closing—not when the customer indicators the acquisition settlement, even when they get a pre-approved mortgage. And when costs drop, consumers might discover they can’t borrow as a lot of the acquisition value as they’d anticipated.
Some actual property builders work with banks to offer financing based mostly on the acquisition value quite than the appraised worth. This may increasingly permit a purchaser to borrow more cash, however it doesn’t change the actual fact they could be shopping for an asset that’s “underwater,” with extra debt than worth.
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A purchaser in Canada might attempt to discover different sources of financing like financial savings, borrowing towards actual property they already personal, or borrowing from household or associates. Personal lenders might lend greater than a financial institution, albeit at increased rates of interest and with extra charges and restrictions. Or a purchaser might attempt to promote the unit earlier than closing on it. That is referred to as an task sale. Nevertheless, the customer’s deposit on the property could also be lower than the property’s value decline, and so they might even need to pay the assignee to take over their contract and shut on the condominium as a substitute. Be aware that task gross sales may have approval from the developer or be topic to extra charges. So, promoting earlier than closing might not be potential or sensible.
When you can’t promote the condominium—even at a loss—and you may’t get a mortgage, what different choices do you could have?
