Time for Developers to do the Unthinkable?

There is growing evidence suggesting that the pre-construction market is cooling. Where projects were selling units at a record-breaking pace back in February/March, now the market has lost a lot of steam and sales at some high profile projects have all but dried up. Buyers have more choices than ever before as the amount unsold inventory is at an all-time high. Is it time for developers to do something that was unthinkable just a few short months ago? By that I mean is it time for developers to start competing with each other on price?

It may sound like I’m writing this as a sort of tongue-in-cheek take on the market, but honestly if you compare prices in pre-construction from one site to the next like I do every day for my clients, you will be shocked at how similar they are from one to the next. One quick example: I recently was analyzing the prices for 2 well-known MEGA Towers that were launched in the past year. When I adjusted for floor height differences, they came out to the exact same average price per square foot! This despite the fact that they were in very different downtown neighbourhoods, they were from different developers, and they were targeting different buyers. What they had in common is they both were launching in the same month, and they were both 40+ storey MEGA towers with several hundred units.

Developers have been able to get away with this type of copy-cat or piggy-back pricing strategy because frankly the market has been so hot that it really didn’t matter what you priced your condos at, as long as they weren’t too different from the other guys. Now, with the market showing signs of slowing over the past 8 weeks, and the list of condo projects available or launching soon getting longer and longer, I believe that we will soon see some great pricing promotions – sales even!

It is time for savvy investors to be patient and wait for the right opportunities. The market is cooling, it’s not frozen! There are plenty of active buyers out there who are ready to go, they are simply demanding value for their dollar more than they have in the past few years. Those developers who understand this and price their projects accordingly will continue to do very well, those who ignore the warning signs in the marketplace will flounder and getting sales will be a challenge in the months ahead. Please subscribe to my Condo Investor Email list to be notified when these deals happen.

Questions or comments? Contact me or leave your contribution below.