Pre-construction condos are priced higher than resales for several reasons:
Let's assume you are the first person in the door.
1) You have the choice of any suite on any floor with any view, you do not have this with a resale.
2) You generally have much nicer, newer finishes than a lot of resales and you get to choose your flooring colours, countertops, cabinets, etc. There will be no holes in the wall, no scratches on the floor,no dust behind the refrigerator!
3) People pay more to have something new and never lived in.
4) Condo fees are always the lowest during the first few years after registration
5) Even during this global market meltdown, the average price of a resale condominium apartment fell very little, there will be no huge correction in prices. Only a few new projects actually lowered prices. Even if someone bought at Ice, Hullmark Centre, 300 Front or U Condos, your unit will be worth more when you move in then what you paid for it. Let's say you buy a $200,000 unit and put $30,000 down, the unit is built and registered in 4 years. At that time the unit is now worth $260,000 - on paper your $30,000 investment has doubled, much better than sticking it in the bank.
6) You get a builder warranty if something goes wrong. Your brand new appliances are under warranty. You likely have a individually controlled meter so you can control your energy costs. You likely have a more efficient and possibly green building, which controls costs.
~~~~~~~~~~~~
Let's look at the risk. If the project gets cancelled, you get your deposit back plus interest.
If prices drop drastically during the pre-construction phase, the project will likely get cancelled, because no bank will loan the developer the money, too much "closing risk".
If prices somehow dropped drastically during construction and your $200,000 unit is now only worth $150,000 - you could walk away from your deal and only lose your $30,000 deposit. Or you hold onto your unit and hope prices go back up to $200,000 in a couple years and you will not lose anything.
If you bought a resale for $200,000 and prices dropped to $150,000, now you could potentially have lost $50,000, whereas if you bought a new unit, you would only have lost $30,000.
I hope that helps.