Business in Vancouver writer Frank O’Brien outlines an interesting story to watch-what is happening with those assignment sales of uncompleted highrise developments in the Vancouver area. Imagine-87 per cent of the 8,955 concrete units commenced in 2016 were pre-sold in advance of construction. And imagine-these units are exempt from assignment and foreign buyer tax payments, so it would be assumed there would be value added for people wanting to invest in a little Vancouver condo concrete.
The interest in pre-sales is such that in 2016 ” a separate Urban Analytics survey found only 31 new concrete condos complete and unsold as of 2016’s third quarter, the lowest Metro inventory in five years.”
“Assignment sales are exempt from B.C. anti-flipping legislation. Enacted in May 2016, it stipulates that sales contracts can’t be assigned without the written consent of the seller and that any profit from an assignment goes to the initial seller. The legislation does not apply to new developments, including pre-sale condos, even if a licensed realtor sells the assignment, according to Ministry of Finance spokesman Jamie Edwardson.”
Land value for Vancouver land has increased by 260 per cent based upon assessments, with some property now being purchased at $1,000 per square foot. This elevated land cost has meant that there has been a flurry of assignment sales of units in sold-out not yet occupied towers, with investors wanting to cash out.
O’Brien cites Strathcona Village, on East Hastings Street, “where one-bedroom condos originally sold two years ago for $450 per square foot to $497 per square foot. The condos are now being advertised as assignments for $770 to $787 per square foot. The Independent project at Main Street and East Broadway, a Rize Alliance tower that sold out in 2015 at an average price of $672 per square foot, has assignments being offered at more than $900 per square foot.”
Pre-sale condo assignments are exempt from the B.C. foreign-buyer regulations enacted in August which are based upon the transfer of title. Buying a pre-sale condo and selling it during construction means there is no Provincial registry recording the transaction as either a buyer or a property owner. Of course the “original investor is required to report the transaction to the Canada Revenue Agency, and may be required to pay income tax on the profits.” The assignment flipper is also exempt from property purchase tax, as it is the owner of the unit at the time of completion of the building that pays that tax.