Buying

Pre-Construction vs Resale Condos in Toronto: Costs, Risks and Who Each Suits

For fifteen years pre-construction was the default way to buy a Toronto condo: put down 20% over two years, wait, and sell or close into a higher market. Since 2022 that trade has stopped working for many buyers — resale prices fell below many pre-construction contract prices, and thousands of units are closing at appraisals under their purchase price. This guide lays out both paths honestly so you can choose for your situation rather than for a cycle that may have ended.

Updated October 22, 2026 · TORE.ca editorial

1. 1.How each purchase works

   Resale

   You buy an existing unit from its owner. You see the unit, the building, the view and the status certificate. You pay a deposit (typically 5%) within 24 hours of acceptance, close 30–90 days later, and your mortgage funds on closing day. The price is the price; your closing costs are the ordinary list.

   Pre-construction

   You sign an agreement with a developer for a unit that does not exist, from a floor plan, with a price set today and a tentative occupancy date two to five years out. The deposit is paid in instalments — commonly 5% on signing, 5% at 30 days, 5% at 90–180 days, 5% at 365 days, and sometimes 5% at occupancy, for 15–25% total before you ever see the unit. When the building is ready you take interim occupancy, pay a monthly occupancy fee, and only at final closing — when the building registers as a condominium, months later — does your mortgage fund and title transfer.

2. 2.Protections the law gives pre-construction buyers

   • A 10-day rescission period after you receive the signed agreement and the disclosure statement (Condominium Act s.73): you can cancel for any reason and get your deposit back. This is the only unconditional exit — use it to have a lawyer review the agreement.
   • Deposits must be held in trust by the builder’s lawyer. Tarion protects condo deposits up to $20,000 if the builder fails to close; amounts above that are protected by the trust and, for most Toronto projects, excess-deposit insurance the builder buys.
   • Tarion warranty on the finished unit: one year on workmanship and materials, two years on water penetration and major systems, seven years on major structural defects.
   • A delayed-occupancy warranty: if the builder misses the firm occupancy date without a permitted extension, you can claim up to $7,500 in delay compensation — and if delay passes the "outside occupancy date" you can walk away with your deposit.

3. 3.Costs you pay in pre-construction that resale buyers never see

   • Occupancy fees: between interim occupancy and final closing you pay the builder monthly — interest on the unpaid balance at a prescribed rate, plus estimated property tax and common expenses. On a $700,000 unit with 20% down that is roughly $3,000–$3,500 a month, none of it building equity, for a period that commonly runs 3–12 months.
   • Development charges, parkland levies, education levies and Section 37 charges passed through in the agreement — negotiate a cap (commonly $5,000–$15,000) before you sign.
   • Utility connection and meter fees, Tarion enrolment chargeback, law-society and administrative fees: typically $2,000–$5,000 combined.
   • HST: new homes are taxable at 13%. Builders quote prices net of the federal and Ontario new-housing rebates on condition you occupy as a principal residence; if you are an investor you pay the full HST on closing (about $24,000 on a $700,000 unit after the provincial cap) and apply for the rental rebate afterward. For agreements signed on or after May 27, 2025, first-time buyers get 100% of the federal portion rebated up to $1 million.
   • Land transfer tax is calculated on the full price including HST.
   • Upgrades: finishes above the builder’s standard are paid in cash, usually before occupancy, and rarely recovered on resale.

4. 4.The risks, and what 2022–2026 taught Toronto

   The central risk is that you fix the price today and the market sets a different price at closing. Between 2022 and 2025, Toronto condo prices fell roughly 15–20% from peak while thousands of pre-construction units bought at 2021–2022 prices came to completion. Many appraised below contract price; because lenders fund on appraised value, buyers had to cover the gap in cash or forfeit deposits. Assignment listings surged and sold at discounts. Several projects were cancelled outright, returning deposits (with little or no interest) after years of waiting.

   • Appraisal gap at closing: your mortgage is based on the lower of price and appraised value. A $100,000 gap on an $800,000 unit is $100,000 of extra cash due on closing.
   • Delay: two-year projects routinely take four. Your life, rates and the market all move.
   • Cancellation: the builder can terminate for reasons permitted in the agreement (financing, approvals, sales thresholds). You get your deposit back; you do not get the years back or the appreciation you were counting on.
   • Floor plan vs reality: ceiling bulkheads, column placement, window size and view are approximate until built. "Approximately 650 sq ft" is commonly 5–10% less usable than the plan.
   • First-year budget shortfall: maintenance fees are set from the developer’s estimate; expect 10–30% increases in years two and three.

5. 5.Assignments: selling before you close

   An assignment transfers your agreement — not a unit — to a new buyer before final closing. The builder’s consent is required (most agreements allow it after a set percentage of units are sold, for a fee of $5,000–$15,000 plus legal costs) and the builder usually prohibits MLS advertising. Since May 7, 2022, every assignment of a new home is taxable: the assignor collects and remits 13% HST on the assignment amount, excluding the portion that merely recovers deposits already paid. Profit is generally business income, not capital gain. The assignee pays land transfer tax at final closing on the total of the original price plus the assignment premium.

   In a falling market assignments sell at a discount to contract price — the assignor eats the loss to escape the closing. In a rising market they are how pre-construction buyers realize gains without ever carrying a mortgage. Either way, assignments are legally and financially intricate; use a lawyer who does them regularly.

6. 6.What resale gives you

   • Certainty: the unit, view, noise, building and neighbours are all inspectable. The status certificate shows the corporation’s real finances, not an estimate.
   • Price discovery: you pay today’s market price, verified by comparables and by the lender’s appraisal before you are committed.
   • Speed: 30–90 days to keys, not 2–5 years. No occupancy fees, no interim period.
   • Space: condos built before roughly 2008 average noticeably larger floor plans per bedroom than new towers, usually at a lower price per square foot — with the trade-off of higher fees and older systems.
   • Negotiation: resale prices move with the market and the seller’s situation; builder prices rarely move except through incentives.

7. 7.What pre-construction gives you

   • Time to save: 15–20% down paid over two or more years instead of all at once — the original attraction, still real for buyers with income growth ahead of them.
   • A new unit under full Tarion warranty, modern systems, and usually lower maintenance fees for the first few years.
   • Choice: floor, exposure, layout, finishes — subject to the caveats above.
   • Incentives in a slow market: capped development charges, free upgrades, extended deposit structures, assignment fees waived, and occasionally price reductions on unsold inventory — the best pre-construction deals of the past decade have been in the slow years, not the frenzied ones.
   • No bidding war: the price is the price, and there is no offer night.

8. 8.Which path suits which buyer

   Resale suits anyone who needs to live somewhere in the next year, anyone whose financing is near its limit (because the appraisal risk is removed), and anyone who values floor plans from the era before 500-square-foot one-bedrooms. Pre-construction suits buyers with secure, rising income who can absorb an appraisal gap, who do not need the unit for several years, and who are buying because they want that specific new building rather than as a speculative trade. If the only reason to buy pre-construction is the expectation that it will be worth more at closing, the last four years in Toronto are the argument against.

   Two practical rules: never sign a pre-construction agreement without a lawyer reviewing it inside the 10-day window, and never buy a unit you could not afford to close on at today’s resale price with today’s mortgage rates.

Rules cited: Condominium Act, 1998 s.73 (10-day rescission), s.75 (first-year budget), s.81 (deposits in trust); Ontario New Home Warranties Plan Act and Tarion — deposit protection ($20,000 condominium), delayed-occupancy warranty ($7,500 cap), 1/2/7-year warranty; Excise Tax Act s.192.1 (assignment sales taxable, agreements on/after May 7, 2022) and CRA GST/HST Notice 323; Ontario new housing rebate and CRA First-Time Home Buyers’ GST Rebate (agreements on/after May 27, 2025); Ontario land transfer tax on assignments. Market observations (price declines, appraisal gaps, assignment discounts 2022–2025) are drawn from TRREB monthly reports and Urbanation quarterly condo market surveys; figures are approximate.