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Why Pre-Construction Projects Outside Toronto Are A Better Investment?

As the real estate market in the GTA becomes increasingly challenging, turning to alternative locations like Barrie, St. Catharines, Hamilton, and Watertown might be a better use of your hard-earned money. Don’t get us wrong… we still believe that pre-construction investments hold power and will bring you a higher return. 

If you’ve been following the news, you know all about how pre-construction condos in Toronto are struggling to finish and when they were sold, they were highly-overpriced. Now that the market has cooled down (since its explosive growth in 2020-2021), those who purchased pre-construction units in GTA overpaid and are struggling to get approved for a mortgage. Many buyers are selling units for up to $150,000 in loss as that’s more digestible than losing over $500,000 if the builder forfeits the unit. 

Why pre-construction projects within Toronto are a bad investment? 

1. Sky-High Prices in the GTA

Real estate prices in Toronto have skyrocketed, making investments less accessible and squeezing the margins for profit. The average cost of pre-construction properties in the GTA has outpaced inflation, wage growth, and even the intrinsic value appreciation, making these investments less viable financially.

2.  Oversaturated Market 

The Toronto real estate market is saturated with investors and buyers, creating a hyper-competitive environment. We’ve come across stories of one single investor buying up to 8-10 units in a single project and there are many of such investors. This creates a fake demand and hikes prices. Many of these units stay empty since the rent is too high. There’s a big demand for affordable housing but most investors are greedy and won’t rent until they get the price they want. On the other hand, this saturation has the potential of causing bidding wars and selling properties for well above their listed price, which can diminish the potential for a good return on investment.

3. Limited Space and Smaller Units

As space becomes a premium commodity in Toronto, new constructions often compromise on the size of living spaces. Most condo units come barely with a kitchen, which lacks functionality and convenience. They are only suited for those who don’t cook at home and with inflation at an all-time high, many people are making home-cooked meals to reduce expenses. 

4. Possibility of increased property price at closing 

There have been documented reports of builders asking $40,000 to $60,000 at the time of closing to cover increased costs of labour and raw materials. Until you get the keys in your hand, this fear looms over your head. A similar case happened in Mississauga where the builder was taken to court and the judge decided that buyers can choose to take a refund of any amount paid. Later, it was reported that the builder sold units at a much lower price because they weren’t getting sold at the increased price. 

Pre-construction projects mockup with detached houses

Are there any good pre-construction investment markets outside Toronto? 

Yes, lots of cities in Southern Ontario are growing and that’s attracting builder attention. Here are some of our top picks: 

1. Barrie

In the last few years, Barrie has witnessed rapid population growth and infrastructure development, becoming a top choice among first-time home buyers and downsizers likewise. Commuting to GTA and the rest of Ontario is convenient since Barrie acts as a central point. If you’re planning to invest in Barrie, we recommend the LakeVu Condos 3, which is located just off Lake Little and offers the most splendid views of the city.  

2. St. Catharines

Located in the heart of the Niagara region, St. Catharines is not just about affordable housing but also about quality of life that attracts long-term residents. The city is benefiting from governmental focus on tourism and wine industry growth, leading to job creation and infrastructural enhancements. Investments in public transport and urban renewal projects make it a promising zone for real estate ventures. We recommend St Catharines for investors instead of homebuyers since students make most of its population and you’d be able to easily rent out your property. Take a look at Design District Condos 2, which is furnished by Louis Vuitton and is all about redefining luxury living. 

mockup of pre-construction condo

3. Hamilton 

Hamilton is undergoing a transformation from a predominantly industrial economy to a more diversified one, with investments in education, healthcare, and technology. This shift is drawing a new wave of young professionals and families, driving demand for housing. The city’s strategic initiatives to revitalize its downtown area and waterfront present lucrative opportunities for pre-construction projects.

4. Waterdown

Waterdown might be smaller, but its growth potential is significant. With plans for new commercial and residential developments like the Luma Urban Towns, it stands as a testament to small-town charm meeting modern-day growth needs. Pre-construction prices are relatively lower than Hamilton, its sister city, making it a good option for long-term investments.

5. Kitchener

Kitchener is emerging as a technological and innovation hub and has caught attention of Silicon Valley giants like Google and Shopify. It also has a growing startup market, which has contributed many jobs to the local economy. The city is home to University of Waterloo and Conestoga College, so renting your unit won’t be a hassle. Q Condos in Kitchener is one of our favourite projects! Check it out here

6. Guelph

Guelph is known for its commitment to sustainability and community-oriented development, which makes it an attractive market for investors looking for stable, long-term growth. It has one of the lowest unemployment rates in the region, thanks to its diverse economy that spans manufacturing, educational services, and agri-innovation. Guelph’s focus on environmental sustainability attracts a demographic that values green living, which is increasingly popular in today’s real estate market. It is the most perfect place to grow and raise your family and enjoy the outdoors. Northside Towns come highly recommended, which are also built sustainably. 

Be a wise investor and weigh all your options before investing in pre-construction. It remains a great long-term investment and work with an experienced realtor who specializes in pre-construction.

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