Cash bonuses of up to $100,000 for realtors; free flights, skis and golf; free strata fees for life and 8% interest paid on deposits for buyers are among the tempting incentives being dangled by Metro Vancouver condo developers.
In some cases the buyer bait is not enough to turn the tide on what the Real Estate Board of Greater Vancouver is calling the worst housing sales slump in 19 years. As of the end of May, there was an inventory of 766 newly completed and unsold condo apartments in Metro Vancouver, compared with 326 for all of 2017, according to Canada Mortgage and Housing Corp. Currently, 25,158 condo apartment units are under construction in the Metro region, representing 70% of the total housing units underway.
MLA Advisory, a Vancouver research firm, estimates that about 5,000 concrete condo units in 17 separate projects had postponed sales launches as of April.
Last December, a Langley developer grabbed headlines with a buyer incentive that promised free mortgage payments for the first year. Now the 78-unit building has been converted to a rental project after sales fell short of the “magic” number.
“The magic number is 50%,” said Vince Taylor, president of Platinum Project Marketing, referring to the percentage of sales condo developers must achieve before they can secure construction financing from increasingly nervous lenders.
In the current market, developers may set out a nine-month marketing window as they attempt to sell half the units in a project. Just two years ago, it was not uncommon for an entire condo project to sell out within days.
Today developers are turning to all forms of imaginative incentives to attract buyers.
Wesgroup is offering price discounts of from $10,000 to $20,000 on its Mode condo project in southeast Vancouver; Intergulf is allowing condo buyers to put down 15% instead of the usual 20% deposit at its Hunter at Lynn Creek project in North Vancouver; the 27North project in North Vancouver by Intergulf and Tatla Developments offers buyers a 10% deposit plus choice of ski pass and skis for all the family, free golf for a year, free mountain bikes for the family, or the cash equivalent; and Platinum Project Marketing’s pitch for the News condo project in Abbotsford includes a choice of $3,000 worth of WestJet (TSX:WJA) airline tickets or the same amount in a gift card to Abbotsford shops.
When RAR Development launched its Eliot condo project June 22 in East Vancouver, where two-bedroom condos start at approximately $700,000, it offered to cover the entire housing costs – mortgage payments, taxes and maintenance fees – for the first year for the first four buyers. But the bait at the 26-storey Soleil White Rock condo tower may be the most lucrative for buyers.
Under this plan from developer RDG Management is an offer to pay buyers of the $484,900-to-$1,609,900 condos 8% interest on their deposit during the three years the Soleil project is being built.
“With the building set to be completed in mid-2022, this means that buyers can receive an extra $23,275 to $77,275 in interest from their down payment of 20%,” explained RDG Management president John Rempel.
Craig Anderson, director of marketing and sales for Magnum Projects, who came up with the idea, said that Soleil is attracting local downsizers who often take a line-of-credit loan on their existing house to cover the condo deposit.
“They are paying 4% to 5% on their line of credit, but they can earn 8% on their deposit at Soleil,” he said.
The earned interest is deducted from the closing price of a Soleil condo. So far, 40% of the Soleil White Rock’s 178 units have sold, and Rempel said he is confident the project will start construction this fall. Anderson said some developers are offering cash incentives to real estate agents of $25,000 up to $100,000 for every new condo unit they sell, but he said direct incentives to buyers appear to be the most effective.
Taylor is marketing the Altus condo project in White Rock, which is offering its buyers free strata fees (average $400 per month) for life, plus a guarantee that the developer will buy the condo back if the buyer is not satisfied with the finished product. But, Taylor insisted, the real incentive for buyers today is tomorrow.
“I call it buying or crying,” he said. “If you don’t buy a new condo today you will be crying about it later. That is how good the deals are right now.” •