Speculators are flipping pre-sale condos and townhouses in Langley like never before, with a 724 per cent increase in assignment sales of homes under construction over three years.
An assignment sale is the term for when someone has put down an initial down payment for a strata property that is still under construction, and then “assigns” the right to take possession of the home to a new buyer before the construction is completed.
The original buyer can benefit from an increase in housing prices between the pre-sale value and the market price of a condo or townhouse a year or two later, when the project is finished.
In Langley, assignment sales rose sharply from 2019 to 2020, then shot into the stratosphere in 2021.
• 2019 assignment sales in Langley: 103
• 2020 assignment sales in Langley: 177
• 2021 assignment sales in Langley: 854.
The data also shows that an increasing number of lots were re-assigned more than once.
In 2019, there were 103 assignment sales on 102 properties, meaning one was re-assigned twice before it was completed. In 2020, there were three properties that were assigned twice.
In 2021, the 854 assignment sales were on 822 properties, meaning up to 32 properties were assigned more than once before completion.
The data comes from the provincial Ministry of Finance, which requires developers to track assignment sales.
The number of people taking part in flipping pre-sale properties has also increased. In 2019, there were 269 people listed as assignors or assignees in Langley. That rose to 451 in 2020 and to 2,302 by 2021.
Since developers have to agree to an assignment sale, and often take a portion of the profit from the seller, the assignment boom in Langley has also resulted in a lot more money going to builders.
In 2019, fees of $246,781.50 were paid to developers related to assignment fees.
In 2020, it jumped to $725,787.87.
In 2021, it was $1.916 million.
“I feel really sad for people trying to buy their first dwelling,” said longtime Langley realtor Joel Schacter.
He said he has heard of investors buying whole floors of condos during pre-sales to be resold via assignment.
It’s becoming increasingly common for developers to include a clause that they take three per cent of the final sale price, or 50 per cent of the total increase in price between pre-sale and final sale, Schacter said. He noted developers have been battered by price increases from lumber to municipal fees over the past few years.
People are jumping into the assignment sale market simply because its a reliable return on investment, Schacter noted.
Asked about the massive increase in assignment sales in Langley, B.C. Finance Minister Selina Robinson cited the work that the government has done previously, such as crackdowns on real estate fraud and the Speculation and Vacancy Tax.
“There’s still so much work for us to do as a government,” Robinson said.
She also noted more resources the province is putting into affordable housing in B.C.
“We’re always looking for ways to mitigate the kind of speculation you’re describing,” she said.
The boom in assignment sales comes amid two years of a frantic housing market that heated up starting in the summer of 2020 after the initial shock of the COVID lockdowns had ended.
There are reasons for assignment sales other than to simply flip a property. The B.C. Financial Services Authority notes that divorce, or acquiring a property for a family member who can’t be present at the pre-sale are among them.
But this boom in assignment sales comes as property prices skyrocketed in Langley.
In January, Fraser Valley Real Estate Board statistics showed that the benchmark price of townhouse – the average price of a “typical” local townhouse – was up 33.8 per cent in a year, having risen from $593,200 to $793,500 in 12 months.
The median and average prices had surged by more than 40 per cent.
For condos, the benchmark price was up by 31.6 per cent, from $406,100 to $534,400. Average and median prices for condos were also higher, and saw increases of just over 40 per cent.
Assignment sales are only tracked in B.C. for new strata properties under construction, which means that these numbers do not reflect other forms of property flipping, such as buying existing condos and townhouses and re-selling them. They do not include any re-sales of new or existing single-family homes, or vacant properties slated for development.
In 2018, the Langley Advance Times reported that local realtors were seeing a significant amount of assignment selling in the community, at the tail end of a real estate boom that had begun in 2015. That boom fizzled out into a minor correction by late 2018 and early 2019.
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