The Pros and Cons of Buying Pre Construction Homes in Canada

In 2022, nearly 10,000 of the 35,000 expected condo units in the Greater Toronto Area were cancelled by developers before they ever broke ground. That’s roughly one in every four planned units gone, with buyers left waiting for refunds on deposits that had been tied up for months or years. Buying pre-construction sounds straightforward — you pick a floor plan, put down a deposit, and wait for the building to rise. But the gap between what you sign for and what you actually get can be wide, and the costs that show up along the way often surprise people who only looked at the brochure price.

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This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.

Pre-construction lets you buy into a project before it’s built, often with a smaller upfront cash commitment than a resale purchase. You lock in today’s price, then pay the deposit in installments as construction progresses. If the market climbs while you wait, the gain is yours. But if the market drops, or the developer runs into trouble, you carry the downside. The trade-off between leverage and risk is the central question here. It’s worth weighing against other ways into the market, like whether the condo market in Canada is a safe investment or a risky bet before you commit. Here’s what you actually need to know.

What I tend to notice is that most people focus on the upside — the idea of getting in early and watching the value climb — and spend far less time on what happens if things go sideways. The research makes it clear that both sides deserve equal attention. If you’re comparing this approach to other first-time buyer strategies, it’s worth looking at how rent-to-own programs are helping Canadians get into the housing market as a different kind of staged-entry option.

The real cost of a pre-construction home in Canada

The purchase price in the sales centre is never the full number. With pre-construction, the gap between what you expect to pay and what you actually pay can be wider than with a resale home, because several cost categories only show up after you’ve signed.

Deposits are typically 15–20% of the purchase price, paid in phases. A common structure is 5% at signing, another 5% within 90 days, and the remaining 5–10% at milestones like foundation completion or occupancy. That staggered schedule is the main appeal — you don’t need the full 20% in your account on day one. But the total deposit is still real money, and it’s money you can’t access until the project finishes or is cancelled.

Then come the costs that aren’t in the deposit. Development charges are levied by the municipality to fund infrastructure like roads, sewers, and parks. These can run into the tens of thousands of dollars and are often passed directly to the buyer. Legal fees for reviewing the pre-construction contract are higher than for a standard resale purchase because the agreement is more complex. Warranty costs under programs like Tarion in Ontario are also the buyer’s responsibility. None of these show up in the brochure price.

On the upside, the leverage is real. A buyer who puts 20% down on a $500,000 unit controls the full $500,000 in appreciation. If the property rises to $600,000 by completion, that $100,000 gain represents a 100% return on the $100,000 deposit — not a 20% gain on the purchase price. That 5:1 leverage ratio is what makes pre-construction attractive as an investment, especially in markets where affordability continues to push buyers toward alternative entry points.

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Interest rates add another layer. If you sign a pre-construction contract when rates are low, but rates rise sharply before completion, the mortgage you qualify for at the end may be far more expensive than you planned. Unlike a resale purchase where you secure financing within weeks, pre-construction leaves you exposed to rate changes for years. A buyer who planned for a 3% mortgage might find themselves facing 6% at closing, with monthly payments that are hundreds of dollars higher. That’s the kind of gap that can turn a promising investment into a financial strain.

Mistakes that cost pre-construction buyers

Assuming the developer will finish on time — or at all

In 2022, about 10,000 of 35,000 expected GTA condo units were cancelled by August alone. That’s not a rare edge case — it’s a structural risk in the pre-construction market. Developers cancel projects for many reasons: financing falls through, construction costs rise faster than expected, or pre-sales don’t hit the threshold needed to secure a construction loan. When a project is cancelled, buyers get their deposits refunded, but they lose any interest that money would have earned during the holding period. If the market has risen since the contract was signed, they also lose the appreciation they were counting on. My first move would be to check the developer’s track record on past projects — how many finished on time, how many were delayed, and how many were cancelled. It’s not a guarantee, but it’s the closest thing to a signal you can get before signing.

Ignoring the full cost of development charges and levies

Development charges are fees the municipality imposes on new construction to fund infrastructure. They’re typically passed to the buyer at closing, and they can add $20,000 to $40,000 or more to the final cost depending on the city and the size of the unit. Many buyers don’t see these numbers until the closing documents arrive, because they’re not included in the advertised price. The contract may also include “levy caps” that limit how much the builder can pass on, but these caps vary and some contracts have none at all. Worth having a lawyer who handles pre-construction contracts review this line before you sign. A service like JustAnswer Canada Lawyers can connect you with a real estate lawyer to review the fine print on development charges and other hidden fees before you commit.

Relying on assignment sales as a plan B

Assignment sales let you transfer your pre-construction contract to another buyer before the building is complete. On paper, it’s an exit strategy if you need to sell before closing. In practice, assignment sales come with complications. The developer often has the right to approve or reject the assignee, and many developers charge a fee for processing the transfer. The buyer who takes over the assignment also needs to qualify for a mortgage based on the original purchase price, not the current market value, which can limit the pool of potential buyers. Tax treatment of assignment profits is different from a standard sale — the Canada Revenue Agency may treat the gain as business income rather than a capital gain, which changes the tax rate. Assignment sales can work, but they’re not a simple escape hatch. The research suggests that buying pre-construction with the intention of flipping before completion is riskier than it looks.

How to buy pre-construction without getting burned

Check the builder’s track record before you sign anything

This is the single most important step. Look at the developer’s past projects: how many were completed on time, how many were delayed, and how many were cancelled. In Ontario, Tarion Warranty Corporation publishes a public database of builder performance, including projects that have been cancelled or have had significant delays. Builders with a history of late completions or cancellations are more likely to repeat those patterns. Also check whether the developer has the financing in place to actually build. A project that hasn’t secured construction financing is a project that could be cancelled at any point. Developers who are transparent about their financing and timeline are generally less risky than those who are vague.

Understand the cooling-off period — and use it

In Ontario, buyers have a 10-day cooling-off period after signing a pre-construction contract. During that window, you can cancel the agreement for any reason and get your deposit back in full. This is the time to have a lawyer review the contract, check the development charges and levy caps, and confirm the deposit structure and estimated closing timeline. The cooling-off period is not optional — it’s a legal right, and it’s there because pre-construction contracts are complex and one-sided in favour of the builder by default. If you’re buying in a province without a statutory cooling-off period, negotiate one into the contract. A builder who refuses is sending a signal.

Plan for the timeline — and add a buffer

Pre-construction projects rarely finish on schedule. Supply chain delays, labour shortages, and permit holdups can push completion by six months, a year, or longer. If you’re planning to move into the unit when it’s done, you need a backup plan for where you’ll live during the delay. If you’re renting in the meantime, factor in the possibility that you’ll be renting for longer than expected. The deposit schedule also matters here — some builders require larger payments at specific milestones, and if construction is delayed, those milestones might come later than planned, which can affect your cash flow. A good practice is to keep the deposit money in a secure, accessible account rather than tying it up in investments that could lose value while you wait. A large digital safe can help you keep your contract documents, deposit receipts, and correspondence with the developer organised and secure during the long waiting period.

What’s changing: the future of pre-construction regulation

Ontario has been tightening pre-construction rules in recent years, including stronger disclosure requirements around development charges and longer cooling-off periods for some types of purchases. Other provinces are watching. The trend is toward more buyer protection, not less, but the regulatory landscape varies significantly by province. British Columbia, for example, has different rules around deposit protection and contract cancellation than Ontario. Buyers who assume the rules are the same across Canada are setting themselves up for surprises. Before signing, check the specific regulations in the province where the property is being built, and ask your lawyer to confirm that the deposit is held in trust by a third party — not by the developer directly. If the deposit isn’t in trust, you’re at much higher risk of losing it if the developer goes bankrupt.

Frequently asked questions about pre-construction homes

What happens next for pre-construction buyers

The pre-construction market in Canada is at a point where the risks are becoming harder to ignore. Rising interest rates, higher construction costs, and slower pre-sales are all putting pressure on developers, and that pressure eventually lands on buyers. The 2022 cancellation numbers in the GTA — roughly 10,000 units out of 35,000 planned — are a reminder that the market doesn’t always go up, and that a signed contract is not the same as a finished home. At the same time, the leverage and price-locking advantages of pre-construction are real and can work well in the right conditions. The difference between a good outcome and a bad one often comes down to how thoroughly you check the builder, the contract, and the market before you sign.

Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.

If this was useful, you might also want to read why more Canadians are moving to smaller towns and rural areas.

Sources and Further Reading

Is the condo market in Canada a safe investment or a risky bet? — A deeper look at the broader condo market dynamics that affect pre-construction values.

Money.ca (2024). The Pros and Cons of Pre-Construction Homes. 🔗

LifetimesCanada (2026). Pre-Construction Condo Buying in Canada 2026: Risks, Delays, and Assignment Sales. 🔗