Why Is Pre Construction Priced Higher Than Resale?

We frequently receive a question that piques our interest: why are pre-construction property prices higher than those in the resale market? When comparing the two, it's crucial to ensure we're comparing like with like. The average price of a condo often includes those that are decades old. Most properties available for resale have been around for a while, contrasting with the future-focused nature of preconstruction properties.

Preconstruction property prices factor in anticipated increases in construction costs, materials, and labour. To illustrate this point, Wealth Builder Associate and real estate agent, Niesh Dissanayake shares a personal experience from a few years ago: “When I ventured into the Calgary market to buy my first pre-construction property - a four-bedroom, three-bathroom townhouse for approximately $370,000. This was about $40k-$50k more than the current resale market rates.

However, when we took possession of the property a year, and a few months later, a bank appraisal valued the property nearly six figures more than our purchase price. So, our initial investment almost doubled by the time we took possession. This demonstrates the potential value of preconstruction properties, considering the time factor and the fact that your initial investment is only the down payment.”

One of the significant advantages of preconstruction properties is that you end up with a brand-new house once it's built. In contrast, even a relatively new resale property would age through the construction period.

Population growth is another factor driving up prices in places like Calgary, where people are flocking in larger numbers compared to cities like Edmonton. Despite Edmonton having cheaper real estate, the lack of population influx means less price appreciation. Alberta, in general, is experiencing significant growth, leading to an increase in property prices due to demand pressure on rental inventory.

In conclusion, while pre-construction properties may seem pricier at first glance, the long-term benefits, coupled with factors like population growth and market appreciation, make them a worthwhile investment.