{"id":692361,"date":"2026-05-25T09:41:12","date_gmt":"2026-05-25T09:41:12","guid":{"rendered":"https:\/\/www.newsbeep.com\/ca\/692361\/"},"modified":"2026-05-25T09:41:12","modified_gmt":"2026-05-25T09:41:12","slug":"condo-developers-urge-big-banks-to-ease-presale-threshold-for-financing","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ca\/692361\/","title":{"rendered":"Condo developers urge big banks to ease presale threshold for financing"},"content":{"rendered":"

Open this photo in gallery:<\/a><\/p>\n

A construction worker on the site of a new condo development in Montreal in February, 2024.Christinne Muschi\/The Canadian Press<\/p>\n

Developers are calling on Canada\u2019s biggest banks to make it easier for them to get financing to start construction on condo buildings. <\/p>\n

With the new-home market in the dumps and individual investors largely gone, developers have been struggling to sell enough of their projects\u2019 units to qualify for construction financing. <\/p>\n

The lack of purchases during the preconstruction phase has roiled homebuilders, forcing some into receivership and leading others to either postpone or cancel condo projects or turn them into rental-only apartments. It has also led to a decline in new homebuilding.<\/p>\n

\u201cWe need to take another look at how the financing model works for condominium construction,\u201d said Ian MacLeod, senior vice-president residential at Dorsay Development Corp., which has been developing condo buildings in the Toronto region for nearly three decades.<\/p>\n

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Banks typically require developers to presell about 70 per cent of their buildings\u2019 units before they will provide construction financing for the project to be built.<\/p>\n

Mr. MacLeod said he has been talking to some of the Big Five Canadian banks about the need to change the requirement. He said lenders appear to be open to lowering the threshold required to get a loan.<\/p>\n

Mr. MacLeod is suggesting lowering the presale level to 50 per cent of a building\u2019s units to qualify for construction financing. <\/p>\n

\u201cThe lenders that I have spoken with have been interested and expressed a desire to work to find a solution to this,\u201d he said. <\/p>\n

Canada\u2019s banking regulator, The Office of the Superintendent of Financial Institutions (OSFI), has no presale requirement for construction financing. <\/p>\n

OSFI guidance does however say that a developer\u2019s construction financing will receive more favourable capital treatment if presales amount to more than 50 per cent of a building\u2019s total contracts, according to its website. <\/p>\n

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Favourable capital treatment means the lender will not have to hold as much capital against the loan.<\/p>\n

\u201cBanks are free to provide construction financing even if the threshold for the more favourable capital treatment is not met, though they may choose not to,\u201d OSFI spokesperson Cory Harding said in an e-mailed statement. <\/p>\n

\u201cThe level of presales may inform a financial institution\u2019s assessment of project risk and, in turn, may lower its capital requirements,\u201d he said. <\/p>\n

If a bank doesn\u2019t have to hold as much capital against a loan, it has the ability to increase its lending. <\/p>\n

A spokesperson for the Canadian Bankers Association, a bank lobby group, said any decision to implement policies \u201cover and above OSFI\u2019s expectations for commercial lending\u201d is a bank\u2019s own decision and dependent on its appetite for risk.<\/p>\n

OSFI\u2019s construction financing guideline has been in place since 2023. Prior to that year, OSFI said condo construction financing was treated as a corporate loan and that loans to developers were based on the external credit rating of the developer. Presales were also not a requirement for financing under the regulator\u2019s previous guidance. <\/p>\n

However, builders say banks have long required them to presell to a level where the value of the sales is around the same amount as the construction loan. <\/p>\n

\u201cThey\u2019ll say \u2018I need most of my loan covered off by the existing sales before we start,\u2019 \u201d said Steve Stipsits, president of Branthaven Homes, which has been building homes in Southern Ontario for more than 50 years. <\/p>\n

\u201cNo one can get to the presale level that they need to give the bank the confidence\u201d that the bank will get repaid, he said.<\/p>\n

B.C. developer Polygon Realty Ltd. said that in today\u2019s environment it is unrealistic for a condo tower builder to get to the 70 per cent threshold to secure lending.<\/p>\n

\u201cWe\u2019re looking at the banks to provide more creativity in advancing construction loans for towers,\u201d Polygon president Neil Chrystal said.<\/p>\n

Polygon was able to get financing to start a project in Coquitlam, B.C., without reaching the 70-per-cent presale level. But that project is not a condo tower.<\/p>\n

Pouyan Safapour, president of homebuilder Devron Developments, said it is challenging for the banks to change since this model has worked well for them. <\/p>\n

About two years ago, Devron launched a condo project in downtown Toronto. The developer is now nearing the 70-per-cent threshold to get financing. <\/p>\n

Mr. Safapour said banks in other countries lend without such a high threshold and some lend without any presales. <\/p>\n

He said building the product before selling the units would attract more buyers who would want to live in the condo, in part because they would have a chance to see it in person instead of making a major purchase based on drawings and models. Also, buyers could move in immediately instead of waiting for years for their building to be built.<\/p>\n

In lieu of that idea, Mr. Safapour said it would help if lenders lowered the presale requirement to 30 per cent or 40 per cent \u201cwhere there\u2019s some proof of concept from some sales,\u201d while leaving the majority of units to be sold after the building is completed.<\/p>\n

In the Toronto region, presales are down more than 90 per cent from their peak during the height of the COVID-19 pandemic. The slowdown has triggered a wave of developer defaults and job cuts, as well as a drop in condo starts. <\/p>\n

Last year\u2019s condo starts were the lowest since 2010, according to data from Canada Mortgage and Housing Corp.<\/p>\n

\u201cI have long felt that some sort of easing is needed,\u201d said Pauline Lierman, a vice-president at new home research firm Zonda Urban. \u201cBanks can continue to do due diligence with who they lend to but ease back on the presold threshold,\u201d she said. <\/p>\n

Dorsay\u2019s Mr. MacLeod said lenders could take a developer\u2019s experience into consideration when setting the presale threshold.<\/p>\n

He also said the federal government could take a \u201cmore active role in construction financing.\u201d <\/p>\n

CMHC provides mortgage insurance and cheap loans to developers that build rental-only apartment buildings. The housing agency does not provide the same support for developers of condos, which are individually owned.<\/p>\n","protected":false},"excerpt":{"rendered":"Open this photo in gallery: A construction worker on the site of a new condo development in Montreal…\n","protected":false},"author":2,"featured_media":692362,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[901,888,902,879,877,903,45,49,48,876,895,896,891,878,875,46,549,295,894,887,914,880,881,893,889,890,884,904,885,909,910,912,907,911,905,908,882,898,899,714,897,906,865,61,900,892,886,883,913],"class_list":["post-692361","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-alberta","tag-arts-news","tag-bc","tag-breaking-news","tag-breaking-news-video","tag-british-columbia","tag-business","tag-ca","tag-canada","tag-canada-news","tag-canada-sports","tag-canada-sports-news","tag-canada-trafficcanada-weather","tag-canadian-breaking-news","tag-canadian-news","tag-economy","tag-education","tag-environment","tag-federal-government","tag-foreign-news","tag-globe-and-mail","tag-globe-and-mail-breaking-news","tag-globe-and-mail-canada-news","tag-government","tag-life-news","tag-lifestyle","tag-local-news","tag-manitoba","tag-national-news","tag-new-brunswick","tag-newfoundland-and-labrador","tag-northwest-territories","tag-nova-scotia","tag-nunavut","tag-ontario","tag-pei","tag-photos","tag-political-news","tag-political-opinion","tag-politics","tag-politics-news","tag-quebec","tag-sports-news","tag-technology","tag-travel","tag-trudeau","tag-us-news","tag-world-news","tag-yukon"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/692361","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=692361"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/692361\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/692362"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=692361"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=692361"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=692361"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}