According to CBC radio news a new trend is emerging in the Vancouver real estate market: Developers are suing condo buyers who try to get out of their pre-sales contract now that their unit is worth less than they signed up for. CBC radio reports that over the last month local developer Amacon has sued 7 buyers for their deposit plus ‘damages’ which equal the difference between what they agreed to pay and the current market value.
Before the market peaked local economist touted our lack of ‘sub-prime’ as proof our housing market was different from crashing US markets. Our lenders didn’t hand out loans to people without a proven ability to pay. Unfortunately what we did have while the market was booming was a mania for condo presales. Presales were supposed to be a ticket to easy money. Anyone could take a credit card advance for the deposit and sign up for a presales contract, planning to flip the assignment before the building was even completed.
Unfortunately for speculators this game of financial hot potato came to a rather shocking end over the last half-year as real estate prices in the lower mainland began to drop rapidly. You can now find many listings on craigslist for people all over the lower mainland who will give up their deposit if you agree to take over their contract.
We have almost 4000 new condo units due to be completed in the downtown core alone this year, and buyers are hard to find. So now the question is how many people are out there that either don’t want to, or are unable to get financing to complete their presales purchase. Are condo presales the local version of the subprime problem, driving some into bankruptcy and contributing to supply in a crashing market?