Fall 2002: Pre-Sale & Protecting your Investment

What’s “NEW” Downtown?

With another mini-boom of residential construction now underway Downtown, the question arises again.

Is pre-sale a good idea?

Pre-sale is a speculation—pure and simple.

If the market conditions are good, you will look like a genius. Buyers who purchased suites 2 years ago and are taking possession now, are very happy campers. Not only have the prices generally improved but the supply/demand ratio has totally flipped around. In 2000 the Downtown market was flooded with re-sale opportunities and there were very few buyers taking advantage.

Now it is the opposite. Previously occupied condos in quality buildings Downtown are extremely scarce, so buyers are turning to the new projects. However, by 2004 the picture could be very different again. There are numerous new rental units under construction right now, plus a large percentage of the pre-sale condo developments are being bought by investor owners. Unless the number of tenants grows substantially in the next 2 years, the rental market could be severely over supplied and this could start to negatively impact the values. Long term is less of a concern.

As the city expands and the Downtown peninsula reaches saturation, upward pressure on values could surpass anything we have seen to date, but that is some years away.

So how best to protect your investment?

The same rules apply for new and re-sale.

• Don’t be overly influenced by finishing. Vancouverites are notoriously susceptible to fancy finishing. Be assured – by the time you come to move, someone will have produced an even trendier kitchen than yours.
• Think location. Downtown (block by block) in 2 to 3 years could be quite different as the residential core changes and develops. Eg: consider the geographic definition of Yaletown 5 years ago vs now vs 5 years from now.
• Think construction quality. 1999 has become a watershed year. With the change in building code and third party warranty requirements for developments post 99, expect to see these hold their values considerably better than their predecessors.
• Think different. Supply and demand still dictates that if you can find something just a little different (without being impractical) you will stand out on re-sale. Outdoor space, protected view, unique floorplan (loft), or heritage conversion are all worth paying a premium for.
• Don’t overpay. If you buy at the right price it will all make sense, so watch out for that GST on new construction and make sure you are completely educated on values before jumping in, no matter how nice the countertops!
• Buy at the right time and sell at the right time. No crystal balls but your best shot at achieving this and all of the above? A well informed Realtor!