It wouldn’t be surprising if developers seize on the idea of selling more new homes online.
In a hot market, builders are at a disadvantage in two ways. First is marketing: The price points for new homes must reflect today’s conditions. But, when buyers actually occupy the finished home in 12 months, the value may have appreciated more than 20 per cent. The resulting capital gain goes to the buyer, not the builder. And, second, the price of construction materials will likely have escalated sharply, which increases builders’ expenses.
Cardel and other builders, of course, have the option of accounting for these uncertainties into a set price. But the advantage of online competition from their perspective is that it gives them a better idea of the state of the market as well as a bigger share of potential capital gains, assuming offers come in above the initial asking price.
Will buyers go along? For the moment, they appear to have little choice. New home builders are experiencing very high demand for their product, thanks in part to a rapidly shrinking pool of listings in the resale market. Fewer than 900 residential and condos were listed for sale in Ottawa’s resale market at the end of February, down from 3,700 three years earlier.
Across the region last year, 26,000 existing homes were sold, down from nearly 30,000 in 2019.
In sharp contrast, there has been a significant increase in the number of homes being built. Last year developers started construction on more than 13,000 dwellings in Ottawa and Gatineau, compared to 11,200 in 2019 and fewer than 9,500 in 2018.
Despite the new supply, Cardel said demand is “overwhelming.”
One more sign of a real estate market on steroids.
This content was originally published here.