You wouldn’t know it, what with the howling winds and plummeting temperatures, but spring is nearly here. We’re on daylight savings time, and the Canada Geese are coming home to roost. It’s not just flowers that bloom in the spring, but also building sites. Seems like a good time to have a quick look at what goes into a new condo development.
In the pre-purchase phase, builders are looking for vacant or underutilized land. They’re getting their finances in order, and consulting experts on the viability of the project, such as lawyers, surveyors and town planners.
Once attracted to a site, the next phase is research and planning. Imagining what could be in a practical sense, such as how big a footprint the building (or buildings) should have, how many units and the like, as well as the more creative side, beginning to conceptualize a design and an intended demographic.
They’re researching the market for homes in that neighbourhood, working through the requirements and regulations that will affect the site, consulting town councils and analysing the neighbourhood in myriad ways. These are things that need to be considered carefully before the project proceeds to the purchase phase, when builders attempt to buy the land at a price that will allow them to profitably develop there.
Once the land is bought, it’s time to move onto the design phase, in which architects are brought in to draw up a project that will be attractive to the intended demographic, as well as comply with all codes and regulations. Just choosing the architect can be an onerous process. Then there is the rest of the team to fill out — interior designers, landscape architects, contractors with all their trades, sales staff, marketers and PR experts, etc. The architects, engineers and legal eagles then make sure all the permits are in order.
A certain percentage of the project must be sold before construction begins in order to secure the rest of their financing, so the sales and marketing teams are going full steam to get the word out as plans become finalized. Some lenders won’t play ball until up to 80% of the units are sold. It’s why preconstruction sales are so important to builders, and also why the prices are best at that time, assuming a healthy market. There is always more time to be spent selling even once the threshold seems met, too, because once vetted it’s a sure thing some buyers won’t qualify and a few more units will have to be re-sold.
At last, it’s groundbreaking time. Some developers stagger their buyer deposit structure so that an installment is owed at the time of construction commencing. It all helps get the cranes going. Sales are ongoing, and ideally by the time the project is finished, all the units are sold too. At each step, there is the potential for snags and delays, all of which are costly.
Of course all of these people rightly expect to make a good living. Developers must all the while maintain overhead, keep their employees employed, pay for office space and all the trivialities that go with it, such as copiers and toner and phone lines, keep the place insured and all the regular expenses of doing business.
Add development charges to all those expenses, and you’re already looking at significant home prices before they’ve made any profit at all.
Our hot market is about to get much hotter, as it does every spring, and condo prices are going to climb in a big way in the next few months; they’ve lagged behind GTA home prices for a while, but as the last semi-affordable option left, they’re about to soar too. Preconstruction can be a great way to find value in a project that may still be years away from completion, giving buyers a chance to pay the best price and make incremental payments that can help take the sting out of ownership.
And once this wind lets up, leaving the house to visit a sales centre seems like a much more attractive way to spend a weekend.