Resale or Presale?

Should you buy a resale or a presale property? What are the advantages and disadvantages of buying resale or presale property in Greater Vancouver?  Do you know how to judge if the prices of a new development are high or low compared to its resale benchmarks? What items should you consider when comparing and reconciling the prices of the two type of properties?

Resale advantages:
- No GST (5% GST is paid for new developments)
- Lower price
- Move in or rent out in a few weeks, faster return on investment
- Faster closing allowing to prevent from any potential increase in mortgage rates or taxes (in case of new development, buyer gets the mortgage loan and possession, and pays taxes at the completion of the development)
- You see what you get (for new developments you can only see showroom units and 2D/3D visuals before purchase)
- No risk for delayed possession (completion date for new developments could be extended)

Presale (new development) advantages:
- Brand new building
- Warranties (usually for 2/5/10 years)
- Delayed cost for maintenance
- Delayed mortgage payments (starting after completion)
- 7 days rescission period, and ability to assign to another person before completion
- Exemption of property transfer tax for a higher property value (if being qualified, $750,000 for new built vs $500,000 for first home)
- Foreign buyers have a chance to get residency until completion to avoid additional property tax

Steps to compare and reconcile the prices of resale and presale properties:

- Identify the average square foot price for the presale property
- Add 5% GST
- Add potential net rental revenue loss until completion
- Find the adjusted average square foot price

- Identify average price per square foot for comparable resale units (similar area, exposure, floor etc)
- Add full estimated depreciation back to the resale building
- Add the cost of early payment
- Add the potential price increase until the completion date of presale property
- Find the adjusted average square foot price

Now you can compare the two adjusted average square foot prices and also above listed advantages and disadvantages to make a better decision!

Please get in touch with us if you need help for making decision if the presale prices of a development are reasonable.