When
Culture
Matters
BY MICHELLE JALVESAC, Broker
One of the most common questions I encounter when showing potential buyers luxury pre-construction projects in downtown Toronto is, “What percentage of foreign buyers are in this building?”
If I mention that more than 20% of the units are owned by foreign investors, there’s a good chance my clients will want to look elsewhere.
Foreign investors and absentee landlords typically do not prioritize the quality of services—such as valet and concierge—that enhance the overall living experience in a luxury building. These amenities contribute to higher maintenance fees and overall carrying costs.
Furthermore, foreign buyers are often looking for investment opportunities rather than becoming end-users, which influences their decisions about unit features. They tend to seek the most financially advantageous options, often opting to rent out their units to tenants who may not value the building’s quality.
This disregard for high-quality fixtures and finishes beyond the builder’s standard can have long-term implications. When these suites eventually come to market for resale, they may not present well and might sell for less than their premium counterparts. This affects comparable sale prices, which are vital for establishing reasonable offer prices based on recent sales in the same building.
However, does the foreign buyer ban really create more opportunities for local buyers? In my experience, the answer is nuanced. While it may seem that the restrictions open doors for affluent local buyers, the reality is more complex. Foreign buyers often settle for compromised layouts in lower floors that discerning end-users avoid. Architects face challenges in building orientation and amenity placement, resulting in noise issues from party rooms, gyms, and elevators. Surprisingly, foreign buyers are sometimes willing to purchase these less desirable suites at discounted prices compared to the premium charged for higher-floor suites with stunning views of downtown, the lake, and nearby parks.
Additionally, for developers to secure construction financing, they typically need to sell 70% of the building from plans. When the foreign investment portion is restricted, and they lose up to 20% of potential sales, many projects face delays or even cancellations. This means that local luxury buyers may find their substantial deposits tied up with builders, earning minimal interest, while their dream condos remain incomplete.
“Delays in construction projects can sometimes extend for years. During this time, buyers’ lives may change, leading them to find that the condo they originally purchased no longer meets their needs. When the building is finally completed and titles are conveyed to the owners, it’s not uncommon to see multiple suites listed for sale.”
BROKER
This situation can raise questions about the quality of the building. Prospective resale buyers may wonder, “Why are so many suites available? Is there a problem with the quality of the construction?” These are valid concerns that can significantly impact the resale values of the units.
So before my Luxury Buyers rejoice, I like to discuss these potential outcomes that rely on so many variables.
