It was about cheap money.
Ultra-low interest rates masked risk, inflated prices, and turned unfinished condos into financial instruments. Buyers didn’t need income growth. Developers didn’t need conservative assumptions. Lenders didn’t need margin for error.
That era is over.
And the cracks are now impossible to ignore.
Cheap Money Was the Business Model
Pre-construction thrived because borrowing costs were artificially low for years.
Deposits felt painless
Carrying costs looked manageable
Appreciation did the heavy lifting
Refinancing was assumed, not planned
Most buyers weren’t asking, “Can I afford this?”
They were asking, “How much will it be worth by completion?”
That only works when money stays cheap.
Rates Didn’t Just Rise — The Math Broke
When interest rates normalized, the entire pre-construction equation collapsed.
A unit that penciled out at 1.5–2% financing does not survive at 5–7%. Monthly payments exploded. Qualification tightened. Appraisals stopped chasing last year’s prices.
Suddenly:
End-users couldn’t close
Investors couldn’t refinance
Assignments stalled
Developers lost their buyer base
This isn’t a temporary slowdown. It’s a structural reset.
Why Prices Can’t Fall Fast Enough
Here’s the uncomfortable truth:
Prices need to fall more — but developers can’t afford to cut them.
Construction costs, land prices, development charges, and financing expenses were locked in years ago. Slashing prices now means selling below cost.
So instead of price discovery, the market gets paralysis:
Inventory sits
Projects delay
Buyers wait
Capital freezes
Pre-construction isn’t crashing overnight. It’s slowly suffocating.
Condos Were the First to Feel It — Not the Last
Condos absorbed the initial hit because they were:
Investor-heavy
Over-supplied
Highly sensitive to financing costs
But this pressure doesn’t stay contained.
When higher-priced units struggle, it drags on the entire market. Buyers compare options. Capital reallocates. Demand weakens everywhere.
Pre-construction was never insulated — it was leveraged.
What This Means Heading Into 2026
Pre-construction in its old form doesn’t work without:
Cheap leverage
Speculative demand
Easy refinancing
Until incomes rise meaningfully or costs fall materially, the model remains broken.
That doesn’t mean development stops forever.
It means only well-structured, well-capitalized, conservatively leveraged projects survive.
The Lendworth Take
Markets like this separate optimism from discipline.
At Lendworth, we’re seeing the shift in real time. Traditional lenders pull back when assumptions fail. That’s when equity-based, private capital becomes essential — not to fuel speculation, but to stabilize projects, bridge timing gaps, and protect value.
Pre-construction wasn’t killed by high rates.
It was exposed by them.
The next cycle won’t be built on cheap money.
It’ll be built on real equity, realistic pricing, and flexible capital.
And that changes everything.