IS IT ABOUT TIME THAT THE GOVERNMENT CRACKS DOWN ON THE CONDO FLIPPERS?2018-02-07 06:59:32 Posted By Amir Hamzehali
The rumours are spreading quickly that the Government is planning to go after the condo flippers this time as speculation grips the pre-sale condo market!
In last few years, it has become a lucrative business for real estate flippers to purchase pre-sale condos and assign their Contract of Purchase and Sale to third parties at profit before the units are ready for registration.
Real estate speculators mostly have become attracted to the pre-sale market because of the fast increases in condominium prices, the condo pre-sales being exempt from foreign buyer tax, and the possibility of tax evasion in condo assignments.
It seems the government is determined to control this segment of the market before the situation gets out of hand by either banning the condo assignments altogether or charging speculation taxes.
In my opinion, any harsh action from the government’s side such as a total ban of the condo assignments, especially with a retroactive law, could create a lot of hardship for a large number of pre-sale purchasers. Without a doubt, the new mortgage rules will cause a large number of pre-sale purchasers not being able to obtain a mortgage at the time their condos are ready for occupation. Under these circumstances, the only way out for these pre-sale purchasers will be to assign their contracts before the completion of their units, otherwise they will likely lose their entire down payment paid to the developer.
Probably, the government’s best course of action to control the market would be to implement high taxes on any profits made on the sale of assignments. In this case, the pre-sale purchasers who are not flippers in nature would have an escape route if hardship hits.
Whatever the government’s actions are to come in future, we would definitely see a flood of pre-sale assignments to hit the market for sale before the new regulations become effective. This could be a great news for the Buyers who were placed out of the pre-sale market, but it would be greater if one day we see these products to get into the hands of the end users in the first place!