In recent years, high interest rates and increased housing supply have created financing gaps for many buyers, making it difficult for them to complete their transactions. This situation has also severely impacted the pre-construction contract resale market, often leaving sellers unable to recover their initial purchase price, even if they manage to find a buyer.
During the market’s peak, investors sometimes purchased pre-construction units, hoping to resell them at a profit before the official closing without ever taking possession. Now, however, even if sellers are willing to forfeit deposits of $200,000 to $300,000, it remains challenging to find buyers willing to take over these contracts.
Investor Dilemma and Market Cases
Real estate agent Grace Chan is also facing a similar predicament. A small 439-square-foot one-bedroom unit she purchased in Leaside for $635,000 in 2021 is set to close early next year. Due to rising interest rates and changes in her personal circumstances—including divorce and an injury—she is struggling to qualify for a mortgage.
“Buyers nowadays are just looking for bargains. They’re waiting for ‘bleeding prices.’ If I can sell it for $400,000, I’d consider myself lucky,” Chan said.
Carr mentioned that there are currently “hundreds, maybe even thousands, of assignment listings on the market, and almost every buyer is ready to walk away at any moment.”
He believes that to successfully complete an assignment, sellers must face reality and align their prices with the current resale value of completed condos. According to data from the Toronto Regional Real Estate Board (TRREB) for November, existing condo prices have fallen by 17% compared to their peak in February 2022. Additionally, during the market boom, pre-construction condo prices were about 40% higher than newly built units (based on Urbanation data). As a result, when buyers try to close at the original contract price, bank appraisals often come in lower, forcing them to cover the difference out of pocket. Otherwise, they risk losing their deposits or even facing lawsuits from developers.
The three-bedroom unit on Parliament Street demonstrates that even larger units are not immune to this trend, while smaller “shoebox apartments” have been hit particularly hard due to their abundance and low demand. Carr also has a listing in Vaughan for a 452-square-foot one-bedroom, one-bathroom unit originally priced at $556,890. It is now listed for assignment at $350,000, representing a staggering 37% loss.
Jonathan Zadegan, Managing Partner of the Zadegan Group, noted that some buyers still include first-time homebuyers and investors betting on a market rebound. However, a new buyer segment—equity funds—has emerged, purchasing these units in bulk. Zadegan observed that while the number of assignments has not significantly increased, the magnitude of losses has grown substantially.
Market Outlook
Grace Chan noted that the Toronto condominium market remains one to watch, especially as more new developments enter the market, making its trajectory highly worth observing.
“The market’s development over the coming period will be particularly intriguing, as more new projects are set to launch.”
Amid high interest rates, market adjustments, and shifting investor sentiment, the pre-construction condo assignment market is expected to remain highly volatile. Sellers must face the reality of current pricing, while buyers continue to wait for opportunities to acquire properties at “bleeding prices.”