Is it really profitable for Canadians to buy a new build in Brampton, Pickering or Milton? Does it fit your lifestyle? The truth is that it’s not always profitable and it certainly may not be right for you!
Blank Canvas: ability to add your personal touch and customize most features (flooring, kitchen countertops, ceiling heights, etc.)
Move-in Ready: no need to renovate, tear down, or replace anything.
Modern/Desirable Designs: open concept, eat-in kitchen, walk-in closets, ensuite washrooms etc.
Less Maintenance: newer appliances, pipes, A/C units, roof, etc., means that the maintenance will likely be held at minimum for the first few years
Warranty: new builds come with a "Tarion warranty" which protect against some defects (read more here: http://www.tarion.com)
Energy Efficient: Newly built homes are more energy efficient due to the newer technologies and construction materials
Deposit Structure: the builder will typically charge the buyer several deposit amounts throughout the construction phase. The total will be approximately 5% of the purchase price. The multiple deposits may make it easier for a buyer to afford the home in comparison to paying the entire 5% upfront.
Higher Cost: newer homes typically cost more than an equivalently sized resale home. The buyers are paying a premium just as they would for a brand new car
Upgrades Can Add Up: they come with basic features... Upgrades will cost quite a bit as they are marked up for the constructor's benefit
Location: construction of new homes typically happens in the suburbs and far away from a major city
Development Zone: newer homes aren't usually located in an established area, therefore schools, malls and other destinations may be a distance away. You may also expect a lot of mud and dirt (due to unpaved roads) for several months or years as the neighbourhood continues to develop
Cookie-Cutter: these homes generally look very much alike and don’t have many distinct features
Smaller Lots: most new builds will have less space between homes, a smaller backyard, and most likely, a neighbour behind
Additional Costs: some of these properties will not come with any appliances (additional cost for these items can reach $10,000). They also probably won't have a fenced the backyard
Extension Periods: builders in Ontario may have up to 8 months to extend closing without penalty (i.e. due to weather, labour shortages, permit issues etc.). This can be extremely inconvenient to some buyers
From the Investor’s Perspective:
The money invested is tied up during the pre-construction & construction periods. There is no ROI (return on investment) during that time
Competition: many buyers purchase a new build with the idea that they will turn a profit soon after the construction is completed. Therefore, when it comes time to sell, there will typically be a lot of competing homes in the same neighbourhood. A higher supply of homes will drive the prices downwards
Although there are many benefits to buying a new build in the GTA, or Canada in general, buying new means spending lots of money on high end upgrades, paying out of your pocket for appliances, and competing against many other homes when it's time to sell. I personally find it less appealing than a resale. I like the character and charm of the latter. I also prefer an established neighbourhood, a close proximity to schools, shopping malls and transit. However, to each their own!