One of the biggest problems facing major condo markets isn’t fading
The outlook has been even worse for buyers who signed for a preconstruction condo at the height of the COVID-19-era market boom, only to see prices and valuations plummet in the ensuing years.
That presale pipeline, and the slew of units now closing after being bought several years ago, remains the biggest crisis point in the sector, according to former Appraisal Institute of Canada (AIC) president Terry Dowle (pictured top).
“Sales or engagements for sales that occurred several years ago – two or three years now, four years ago – they’re just starting to come to completion,” Dowle told Canadian Mortgage Professional. “That expectation – ‘I bought my unit at X amount’ – that dollar number’s come right down. So that’s a challenging area in itself. And what that does is it flows into the secondary market.”
Dowle highlighted a distinction that appraisers use to explain the disconnect: value in exchange versus value in use. The former asks what a comparable unit would cost elsewhere, while the latter reflects something specific to one buyer, such as a view that can’t be replicated.
But in a market flooded with newly completed presale inventory, the former is what dictates price, and it isn’t supporting the numbers buyers expected when they signed years ago.
