By Al Maitland
In condominium market terms, an assignment is an advance option or a right to purchase a condo unit when it eventually comes onstream. Assignments are sold by the builder to an interested buyer during the construction period or at another point before the condo can be officially registered, land ownership can be legally transferred and the sale closed.
An assignment gives the buyer dibs on the unit (for a price), ahead of the time when it can be officially purchased – often about three or four years in advance.
Transactions of buying and selling pre-sale assignments are neither regulated nor recorded on MLS. They’re usually found on specialty websites or classified sites with dedicated real estate sections – like Kijiji.
During the last few years, assignment sales (and assignment resales) have been growing due to a lack of available resale condos in major Canadian cities (especially Vancouver and Toronto). In some cases, assignment resales are driven by changing personal circumstances for the original purchaser, who may no longer be able to close the sale. This can happen for a variety of reasons, such as changes in family size or financial situation. In other cases, it’s purely a profit opportunity, if the market value of the unit has risen to a significant premium compared to the assignment price. A lot can happen in three to four years.
I had a look through our Kijiji real estate data to see how assignments are performing on our site. There are hundreds of listings in both the Condos and Houses for Sale categories labelled as “assignment sales.” In the Greater Toronto Area Condos for Sale category, “assignment” is the second most searched term. In Vancouver, it’s not quite as hot a search term, but still up there at #14. Other Canadian metropolitan areas are also seeing growth for this query.
What’s more, a combination of both domestic and foreign-based buyers is active in the assignment market. Kijiji data finds page views originating outside of Canada for condos and homes for sale have increased more than 25 per cent over the past year, from countries including France, the U.K., India, the Philippines, Australia, Brazil, South Korea and Japan. Investors or those planning a move to Canada are looking for “ground-floor” opportunities to lock up condo units.
For domestic buyers, having access to information and purchase opportunities on new build projects is particularly important for the vibrancy and livability of communities, as it gives greater insight into the projected socioeconomic demographics that can help shape and impact future neighbourhoods. Assignment buying can also help make some of the hottest markets more affordable, given that prices tend to rise the closer units get to the official purchase transaction stage.
The growth in assignment sales offers significant opportunities for agents in the condo market. Risk is relatively low and the potential for savings from getting in early – and/or profit potential through resale – can be sizeable.
We can expect to see the condo assignment market continue to grow over the next few years, despite the reported downturn in the Canadian housing market overall. For first-time home buyers, the thought of purchasing an affordable, centrally located home in one of Canada’s metropolises can seem out of reach – a solution that assignment sales bring to the table. To find out what’s available, visit sites like Kijiji that show listing outside the traditional housing buy/sell avenues – you may be pleasantly surprised at what options exist.