I think what many neglect to see is the investment the developer makes into the properties marketing and promotion as well as the ongoing costs during the sales process. The resale market does not really deal with those costs and the costs we incur when reselling are no where near the scale of a developer.
Taking your scenario of a unit with an upfront cost of $250k (or $5k per week), what are the additional costs? There will need to be a marketing budget for the call centres, sales people, administration, ongoing maintenance until all units are sold, the staff of the facility for the inventory until all units are sold... you get the picture. I don’t pretend to know what these numbers are but, based upon the presentations I have been to, the costs can be quite large as some developers are quite elaborate. As well, selling these units goes on for years.
I have a friend with 2 sons in the home building industry. They allocate $30,000 to each home just for marketing, promotion and carrying costs. Selling costs are above that and they are a small builder in the market. I couldn’t imaging the costs associated with a development of units in the hundreds.
So I guess my best response to you question is that, I paid HGVC $30k for my Elara TS back in 2014 and found out later I could have found better in the resale market. I think I did OK at the time, some people need to pay developer prices in order for this industry to exist. Will I pay developer again? Not likely (I never say never as you don’t know what the future holds) and will focus on resale for my additional needs. Just as I purchased my 1st new home from a developer. The 3 homes since have all been resale homes for a wide variety of reasons.
