With High Interest Rates, Is It Still a Good Time to Buy a Pre-Construction Condo?

November 18th, 2022

Interest rates have risen dramatically in Canada recently, putting pressure on Canadians who have (or are hoping to acquire) a mortgage, line of credit, or other loans with variable interest rates. Since March 2022, the Bank of Canada has raised interest rates six times, and rates have shot up from 0.25% to 3.75% (source). High interest rates mean that it now costs Canadians more to borrow money, and they’re leaving many people wondering if now is a good time to buy a pre-construction condo in Toronto and to enter the housing market.

While the higher mortgage costs are leaving many Canadians feeling anxious and frustrated, we believe that it is still a good time to buy a pre-construction condo in Toronto or the Greater Toronto Area (GTA). Here’s why:

The Increasing Value of Pre-Construction Condos

Buying pre-construction means that your new condo won’t be ready for approximately three to five years from the date of purchase. In most cases, the value of the condo increases from the time it’s finished without the owner having to do any work or upgrades. And given the rate at which Toronto condos appreciate, it’s a smart time to get into the market despite the higher interest rates.

The Lack of Housing Inventory

Toronto has a notoriously low amount of homes available for sale compared to the demand, which we can expect to continue to drive higher prices in the GTA. As such, it’s best to get into the Toronto real estate market as soon as you can reasonably afford it.

The Ever-Growing Demand for Housing 

On top of the current low inventory, the demand for housing in Toronto is expected to continue to increase. The latest data from Immigration, Refugees and Citizenship Canada (IRCC) reveals that Canada welcomed 274,980 new permanent residents in the first seven months of this year, which puts Canada on track to see immigration hit 471,394 new permanent residents in 2022, or 16.1% more than the record-breaking 406,025 new permanent residents to Canada last year. The country plans to welcome another 477,055 immigrants next year and 451,000 in 2024 (source). The vast majority of these immigrants come to Ontario, including 227,235 newcomers in 2022 (source). In 2021, over 9 in 10 recent immigrants lived in one of Canada’s 41 census metropolitan areas, which are large urban centres of over 100,000 residents. As was the trend over the past 50 years, Toronto (29.5%), Montréal (12.2%) and Vancouver (11.7%) continued to welcome the most recent immigrants in 2021 (source).

With all of this continued growth in Canada, Ontario, and the GTA, the demand for housing shows no signs of slowing down. Every new resident will need a place to live. This will continue to drive up real estate demand and prices. The sooner you can get into the market and secure your investment, the better.

More Bargaining Power for Buyers

The shifting market and turbulence may give new home and condo buyers more leeway to negotiate and more bargaining power, which are valuable things to have on your side when looking for a GTA house or condo to purchase. As the rising interest rates have caused demand for new homes to decrease, buyers who remain in the market will have a greater opportunity to take their time and to be smart and prudent when making important financial decisions. Whether it’s negotiating the price of a new home or condo, or adding conditions to their offer, buyers will have the upper hand in this market. They’re also less likely to have to enter a vicious bidding war.

It’s Important to Play the Long Game

Finally, with real estate, you have to play the long game. The dips and rises of the real estate market and varying interest rates are normal, and there will always be rebounds and corrections. Waiting for the “perfect” time to buy is nearly impossible, so it’s best to buy what you can afford, when you can afford it. Despite the fluctuating market, the long-term growth possibilities are strong. Real estate is a long-term investment strategy and we know from both recent and long-term trends that it always appreciates. In short, real estate is a good investment.

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BAZIS is a Toronto real estate development company specialized in new construction condos for sale and pre-construction condos in Downtown Toronto. We are committed to excellence in every facet of the commercial and residential real estate development process. Combining visionary architecture, design, marketing and construction with the epitome of corporate integrity and environmental responsibility, BAZIS has become a major force in articulating Toronto’s ever-evolving skyline.