One Vancouver developer is dealing directly with the problem of condo buyers who purchase condos prior to occupancy, and then “re-assign” or sell the contract to another buyer prior to completion, pocketing the proceeds. While the Real Estate Council has regulations around “assigning” single family houses, there is no similar regulation of condos prior to occupancy, and this activity has boosted the price of units.
As Joanne Lee-Young in the Vancouver Sun reports prices started at $890 a square foot for a 450 square foot unit in a 53 storey tower called One Burrard Place at Drake Street. That amounted to $400,000 for that unit in the winter of 2015. By early 2016, with all 354 units sold prior to building, condo prices increased around 40 per cent and the cost for a similar unit was about $1,250 a square foot.
President and CEO of Reliance Properties Jon Stovell noted that there was a “rapid increase in requests by buyers to re-assign pre-sale condo units at One Burrard. As well, there have been reports of “unauthorized advertising of (One Burrard) assignments” online, in particular on private realtor websites and through emails and social media.” And he came up with a solution: instead of accepting 1.5 per cent of the initial purchase price back to the developer in order to gain permission to assign the sale to a new buyer, the seller must pay 25 per cent of the profit made on the assignment. Hoping to discourage speculation, Jon Stovell observed ““There has already been a regulatory shift in the single-family market where it is automatic in all contracts that if there is any ‘assignment lift’ the proceeds will go back to the homeowner.”
Stovell also noted that while some buyers are upset that the developer is taking what the buyer perceives as their “windfall” before assigning the property, those buyers are welcome to wait until the condos are completed, and sell the units after the building is completed. The re-assignment of condo units appear in a variety of websites so it is difficult to ascertain how many buyers are trying to resell their units prior to construction completion. What will be interesting is to see whether the 25 per cent payback to the developer limits the flipping of units prior to occupancy, and whether that contains some of the rising sale prices of these condo units.
October 5, 2017