Vancouver Pre Sale Condos- Sold OffShore, Flipped Locally
As the focus shifts from the single family market to condos the crunch to enter the market has never been more fierce. Bidding wars are ravaging anything that resembles four walls and a roof. To make matters worse, record supply under construction is being largely sold offshore. Similar to a Ponzi scheme, pre sale condos are sold to offshore investors who generally buy multiple units at a time and later assign or “flip” to local buyers at an inflated cost.
This was exposed last summer by Kathy Tomlinson but in recent months has become even more glaring. Since the introduction of the foreign buyers tax, which has deflated the luxury house market, the attention has shifted to pre sale condos. Pre sale condos are exempt from the 15% foreign buyers tax, and have no doubt become a very attractive investment. Further, once assigned to a local buyer at a higher cost, it’s easy to avoid capital gains tax as nothing ever registers in land titles office.
It’s the perfect speculative system. Pay deposit increments of 5%, if the market tanks, one simply walks away from the 5, 10, or 15% worth of deposits. If the market continues to boom you flip it for an easy profit and dodge capital gains tax. Good luck tracking down an international buyer living in China, he’s long gone.
Ever wonder why new condo developments remain empty for months after vacancy is issued? Surely it can’t be that hard to find tenants in a city gripped with a 0.5% vacancy rate.
Pre sale condos in Vancouver are like unregulated derivatives, priced at astronomical new highs, (now selling for over $1200 on the East side of Vancouver). Soon to be flipped to the highest bidder amongst a ferocious bidding war.
Until developers are incentivized to sell locally don’t expect housing to become any more affordable.