The Canadian real estate market is a dynamic one, often influenced by several economic factors. With the post-pandemic shift in the market, we’ve witnessed a lot of fluctuation in property prices. As prices have recently increased, this trend may cause potential first-time homebuyers to hesitate when purchasing their home.
However, when it comes to pre-construction properties, now is actually one of the best opportunities to secure a deal. Let’s walk through some of the key reasons why pre-construction investments remain a smart choice, and how you can strategically help your clients navigate the current market.
Pre-construction pricing dynamics
Best suited for first-time homebuyers, the key fundamental aspect of pre-construction properties is the pricing mechanism. Unlike investing in resale, pre-construction properties are sold at today’s prices but completed and delivered roughly three to four years later.
What does this mean for your buyers? The price they agree to now does not reflect the final market value at the time of completion. Real estate markets are cyclical, and as history shows, property values are set to appreciate over time. Plus, pre-construction offers a flexible down payment plan best suited for first-time homebuyers.
Many aspiring buyers are hoping for a further price drop, but by the time their pre-construction property is built, the market is likely to have rebounded, resulting in a property value increase. Essentially, buyers lock in a lower price now for a property that will be worth a lot more in the future. This inherent appreciation potential makes pre-construction properties a lucrative investment.
Helping clients adopt a long-term perspective for real estate
These days, it’s crucial for both buyers and sellers to educate themselves on why the real estate market is all about long-term perspective. The idea is to build and preserve wealth over time.
For buyers, this means getting used to market fluctuations and understanding that patience is key. The current dip in real estate presents an opportunity to enter the market at a slightly lower cost, instead of expecting prices to go down further and that values will rise by the time their property is ready. Have these important conversations with your clients.
Taking advantage of a buyer’s market
In today’s buyer’s market, agents and brokers have a unique opportunity to guide their clients through uncertainty and position them for long-term success. Here are key strategies that can help professionals in the field increase client confidence and close deals effectively:
1. Strengthen negotiation leverage. As an agent, the ability to negotiate effectively becomes even more critical in a buyer’s market. Educate buyers and investors on the leverage they have, not just in price but in securing favorable terms like extended deposit schedules, builder incentives or upgrade packages. Emphasize the value of these perks, and use them to craft deals that align with buyers’ long-term objectives.
2. Highlight the importance of capital utilization. In a market where things are changing by the minute and liquidity is king, it’s important to convey to your clients the advantages of putting cash reserves to work in real estate over letting them sit idle in bank accounts.
Highlighting how pre-construction properties offer a unique opportunity for growth where they appreciate over time, it’s important to note that property values are expected to rise over the next few years. Investing now means buyers are set to benefit from future appreciation. The property they invest in today at the current price could be worth significantly more by the time it’s completed, providing substantial returns on their investment. Money in low-interest savings accounts can be worth much less in the future, whereas investing in pre-construction can yield better returns.
3. Role of population growth in demand. With the growth in population around urban centers and the increasing opportunities and improved lifestyle benefits that come with it, the demand for housing is only going to increase.
Population growth means more demand for new homes, pushing property values upwards. While we already witness many developers working towards providing more housing options, the short-term price dip is only here for a while before demand increases again. New construction is finite in desirable areas, but this means it will inevitably lead to higher property prices.
Improving economic conditions also results in a return to consumer confidence and, with that, the demand for real estate is also set to increase. This cyclical recovery will bolster property values.
Seizing the moment
In a buyer’s market, the role of an agent or broker extends beyond merely facilitating transactions. It’s about empowering buyers with the knowledge, strategies, and confidence they need to make sound investment decisions.
Real estate is a journey,…
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