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According to a real estate agent, the number of calls from buyers of uncompleted flats has doubled in the past few months, as more and more uncompleted buyers worry that they will not be able to complete the transaction due to a sharp rise in interest rates and are in urgent need of resale before the house is handed over.
In Canada, new apartments are usually sold before they are completed, sometimes years before the buyer gets the key, which is often referred to as uncompleted flats by Chinese.
A legal transaction in which the developer usually allows the uncompleted property buyer to transfer the rights and obligations of the purchase agreement to another buyer before the house is handed over.
Now, some real estate agents have noticed a sharp increase in inquiries about so-called transfer sales.
The number of calls from buyers has doubled in the past few months, and many uncompleted property buyers want to know if they can get rid of their purchase agreements with developers, said Simeon Papailias, a real estate agent at Royal Real Estate firm Royal LePage.
“We have seen a significant increase in the number of inquiries because of fear and instability in the market,” he said. “We have received inquiries from customers about whether they should withdraw from the transaction or whether they should keep the property and hand it over.”
Some buyers want to sell it at any price and withdraw from the deal, he added.
The main reason is not only that interest rates are rising, but that loans have to undergo stress tests, and borrowers need to prove that they can afford mortgages at higher interest rates, which are currently at 7%. Many uncompleted property buyers are not eligible for mortgages and feel “a lot of pressure”.
But for buyers who choose to transfer uncompleted flats, a more disturbing sign is that transfer sales are even increasingly difficult to hand over, says Ron Butler, a loan broker.
Usually, investors buy uncompleted flats in advance and then try to sell them before the end of the deal to make a profit. For example, if they buy an apartment in a flat at a price of $500000, and when they decide to sell, the market value of the apartment has risen to 700000 yuan, they will sell it at a slightly lower price, which will encourage new buyers to still make a profit.
But it’s different now.
The price of an apartment in GTA in Greater Toronto has fallen by nearly 90000 yuan since its peak in February 2022.
Butler said this means that buyers who have bought since the outbreak of the pandemic may have to sell the property at a lower price and lose money every minute. However, this is better than losing the 20% deposit paid to the developer.
For buyers who bought uncompleted apartments during the pandemic, the situation is even worse.