In the first three months of the year, 123 Langley properties were resold before their construction was even completed, according to provincial data that tracks disposal sales.
Assignment sales are the resale of condos or townhouses that have been pre-purchased before construction is complete.
Since the original buyer only has to pay the initial down payment for a condominium property that is still under construction, it is relatively inexpensive. They can then wait and, at any time before the construction is completed and the sale is concluded, they can “assign” the right to take possession of the house to a new buyer.
In some cases, disposal sales occur because the original buyer needs to change their plans and cannot move in, but in many cases this is done for speculative purposes.
The initial buyer can benefit from an increase in home prices between pre-sale value and the market price of a condo or townhouse a year or two later.
Given that until recently the price of housing has skyrocketed, the benefits could be substantial.
According to the Ministry of Finance, 123 properties were resold by sale from January to March. There were 127 disposal sales, meaning up to four of these properties were flipped more than once before being completed.
There were 353 people involved as assignors or assignees.
If these numbers remain stable for the rest of the year, it marks a decline in the number of assignment sales at Langley.
In 2021, there were 854 disposal sales of 822 properties in Langley, a 724% increase in just three years.
However, the 127 sales from January to March show that the practice remains common here.
In 2019, there were 103 total assignment sales at Langley, and in 2020, there were 177.
READ ALSO: Reversal of pre-sale condos in Langley, townhouses increase by 724% in three years
READ ALSO: Langley Home Sales Still Down, Prices Fall
The Department of Finance requires the tracking of mission sales.
Developers must also agree to an assignment sale and often receive a fee to allow it to proceed. Last year, Langley developers collected more than $1.9 million in fees from divestiture sales.
The impact of large amounts of mission sales on overall prices is still unknown, said Andy Yan, city program director at SFU.
“It definitely has a financial ‘floor’ effect,” he said.
The question is whether this also has an inflationary effect on prices. But the government has only been collecting data on mission sales for a relatively short time.
The other question is to what extent this demand has influenced development.
“How many of these units are purely speculative, compared to where people will live comfortably for the next five to ten years?” Yan said.
He said the next six to nine months could reveal more. Prices in Langley have risen faster than prices in Vancouver in recent years, and Yan noted that prices also drop faster in communities like Langley when the housing market turns.
However, he does not expect a “price apocalypse”.
“Canadian mortgage debt is one of the most stable debts in the country,” he said.
The 2021 disposal sales boom came in a year in which the property market, fueled by historically low interest rates and demand for additional homes in suburbs such as Langley, saw prices reach new heights.
In Langley, the benchmark price for a townhouse in January 2021 was $593,200, while condos cost $406,100, according to the Fraser Valley Real Estate Board.
As of December 2021, the benchmark price for a townhouse was $771,200 and condos were $520,700.
Benchmark prices plateaued in Langley this spring, peaking in May before June saw a price decline, reflecting national trends as interest rates rose.
Disposal sales records do not reflect the extent of speculation in the local housing market, as they only cover homes that are flipped while still under construction. Single-family homes are not included at all, whether new or existing, and neither are existing condos and townhouses.
Got a story tip? Email: [email protected]
Like us on Facebook and follow us on Twitter.