Cash bonuses of up to $100,000 for realtors; free flights, skis and golf; free mortgage interest and property tax payments for the first year; no strata fees for life; eight per cent interest paid on deposits for presale buyers. All of these and more – including such headline-grabbing schemes as free avocado toast and a year’s worth of wine – are among the tempting incentives being dangled by Metro Vancouver condo developers.
But in some cases the buyer bait is not enough to turn the tide on what the Real Estate Board of Greater Vancouver says is 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. (CMHC). Currently, 25,158 condo apartment units are under construction in the Metro region, representing 70 per cent 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 per cent,” explained Vince Taylor, president of Platinum Project Marketing, referring to the percentage of sales a condo developer 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 purchasers.
When RAR Development launched its Eliot condo project in East Vancouver last week, where two-bedroom condos start at approximately $700,000, it offered to cover the key expenses – mortgage interest, property taxes and strata fees – for the first year for the first four 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 per cent instead of the usual 20 per cent deposit at its Hunter at Lynn Creek project in North Vancouver. The 27North project in North Vancouver by Intergulf and Tatla offers buyers a 10 per cent 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. Platinum Marketing’s pitch for the News condo project in Abbotsford includes a choice of $3,000 worth of WestJet airline tickets or the same amount in a gift card to Abbotsford shops. Not to mention less-valuable but more media-hyped offerings such as a year’s worth of avocado toast or wine.
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 a tidy eight per cent 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 per cent,” said John Rempel, president of RDG Management.
Craig Anderson, director of marketing and sales for Magnum Project Marketing, 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 four per cent to five per cent on their line of credit, but they can earn eight per cent on their deposit at Soleil,” he said. The earned interest is deducted from the closing price of a Soleil condo.
So far, 40 per cent of the Soleil White Rock’s 178 units have sold, and Rempel said he is confident the project will start construction this fall.
“It will be built,” he said.
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.”
- With files from Joannah Connolly