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http://www.theglobeandmail.com/servlet/story/RTGAM.20090319.reBelford0320/REStory/RealEstate/home
With sales in the doldrums, marketing swings into high gear. 'Free' Mercedes anyone?
TERRENCE BELFORD
From Friday's Globe and Mail
March 19, 2009 at 2:37 PM EDT
January new condo sales figures are in. And yes, the results are dismal. Only 217 new suites were sold that month, a marginal increase from the 198 sold in December, 2008.
The results came as no surprise. Fears about family finances and job losses, and perhaps the faint hope that prices will come down has kept potential buyers at home.
So will things get better? Undoubtedly. Developers are busy trying to come up with incentives short of price reductions that will draw buyers to their sales offices, and surveys show a significant chunk of the population does plan to buy a new home during the next two years.
The only issue up in the air is when.
"Right now, every developer is looking at just what incentives can be offered to kick-start sales," says George Carras, president of RealNet Canada Inc., which tracks housing in the Greater Toronto Area. "They are especially concerned about remaining inventory in completed buildings."
If you need an example of just how far some developers are willing to go to get people lined up at presentation centres, take a look at Concord Adex Developments, creator of both Concord CityPlace at Spadina Avenue and Front Street West and Concord Park Place on the south side of Sheppard Avenue East, just west of Leslie Street.
On March 28, Concord Adex will offer a 20-per-cent cash rebate of the total purchase price on any suite in either project to the first 20 buyers who sign deals on that day. The cash is payable by cheque on closing and not deducted from the purchase price.
Concord Adex calls it a 20/20 deal. It celebrates the company's 20th year in business.
Last month, it made a similar offer to real estate agents plus 15-per-cent cash back on closing to any other buyers after that first 20. The cash-back incentive resulted in about 40 suites being snapped up by agents within a three-hour period.
In Richmond, B.C., Polygon Homes went as far as offering a new Mercedes-Benz ML320 to anyone buying one of its townhouses, Mr. Carras says. That time, the celebration was for Chinese New Year.
"They just about sold out," he says.
A word of warning here. The idea of a new Mercedes as well as a new home may sound terrific but that approach may backfire when it comes to arranging financing needed to close the deal.
Expect the men and women who appraise the market value of your new suite on behalf of lenders to deduct from the purchase price anything that does not add intrinsic value to the unit itself. Lenders are only concerned with the real estate, not the perks that may come with it such as cars, boats, furnishings or club memberships.
If you get a free car, they will knock the price of that car off what you paid for the suite and base your mortgage on that. The result could be having to come up with another $15,000 to $20,000 on closing.
"You have to consider whether those incentives offered add value to your suite," Mr. Carras says. "Things like upgrades, lower down payments, a period of free maintenance payments are great. New cars are not."
Now back to buyer demand. A survey from Royal Bank of Canada polled 2,026 adult Canadians coast to coast during the first week of January and found 27 per cent said they would be buying a new home within the next two years. That's a significant gain from the 23 per cent reported a year earlier.
In the under-35 age group, a whopping 48 per cent said they would be in the market compared with 36 per cent last year. Among renters, it was 38 per cent.
Part of the reason behind increased demand is the belief that housing prices will drop this year. About 54 per cent said prices will be lower than in 2008, compared with 31 per cent a year earlier.
"The current economic environment does not appear to have dampened Canadians' overall confidence in the housing market," says Karen Leggett, head of home equity financing at RBC. "Low mortgage rates and favourable prices are influencing home purchase intentions this year and may be the reason why more Canadians are poised to purchase within the next two years."
The key question, of course, is when will all those people start translating intent into action. The next few months may provide some insight.
"Every developer in town has spent the past few months figuring out what can be done to bring people back to sales offices," Mr. Carras says. "I think this month you will start to see the result of their brainstorming."
With sales in the doldrums, marketing swings into high gear. 'Free' Mercedes anyone?
TERRENCE BELFORD
From Friday's Globe and Mail
March 19, 2009 at 2:37 PM EDT
January new condo sales figures are in. And yes, the results are dismal. Only 217 new suites were sold that month, a marginal increase from the 198 sold in December, 2008.
The results came as no surprise. Fears about family finances and job losses, and perhaps the faint hope that prices will come down has kept potential buyers at home.
So will things get better? Undoubtedly. Developers are busy trying to come up with incentives short of price reductions that will draw buyers to their sales offices, and surveys show a significant chunk of the population does plan to buy a new home during the next two years.
The only issue up in the air is when.
"Right now, every developer is looking at just what incentives can be offered to kick-start sales," says George Carras, president of RealNet Canada Inc., which tracks housing in the Greater Toronto Area. "They are especially concerned about remaining inventory in completed buildings."
If you need an example of just how far some developers are willing to go to get people lined up at presentation centres, take a look at Concord Adex Developments, creator of both Concord CityPlace at Spadina Avenue and Front Street West and Concord Park Place on the south side of Sheppard Avenue East, just west of Leslie Street.
On March 28, Concord Adex will offer a 20-per-cent cash rebate of the total purchase price on any suite in either project to the first 20 buyers who sign deals on that day. The cash is payable by cheque on closing and not deducted from the purchase price.
Concord Adex calls it a 20/20 deal. It celebrates the company's 20th year in business.
Last month, it made a similar offer to real estate agents plus 15-per-cent cash back on closing to any other buyers after that first 20. The cash-back incentive resulted in about 40 suites being snapped up by agents within a three-hour period.
In Richmond, B.C., Polygon Homes went as far as offering a new Mercedes-Benz ML320 to anyone buying one of its townhouses, Mr. Carras says. That time, the celebration was for Chinese New Year.
"They just about sold out," he says.
A word of warning here. The idea of a new Mercedes as well as a new home may sound terrific but that approach may backfire when it comes to arranging financing needed to close the deal.
Expect the men and women who appraise the market value of your new suite on behalf of lenders to deduct from the purchase price anything that does not add intrinsic value to the unit itself. Lenders are only concerned with the real estate, not the perks that may come with it such as cars, boats, furnishings or club memberships.
If you get a free car, they will knock the price of that car off what you paid for the suite and base your mortgage on that. The result could be having to come up with another $15,000 to $20,000 on closing.
"You have to consider whether those incentives offered add value to your suite," Mr. Carras says. "Things like upgrades, lower down payments, a period of free maintenance payments are great. New cars are not."
Now back to buyer demand. A survey from Royal Bank of Canada polled 2,026 adult Canadians coast to coast during the first week of January and found 27 per cent said they would be buying a new home within the next two years. That's a significant gain from the 23 per cent reported a year earlier.
In the under-35 age group, a whopping 48 per cent said they would be in the market compared with 36 per cent last year. Among renters, it was 38 per cent.
Part of the reason behind increased demand is the belief that housing prices will drop this year. About 54 per cent said prices will be lower than in 2008, compared with 31 per cent a year earlier.
"The current economic environment does not appear to have dampened Canadians' overall confidence in the housing market," says Karen Leggett, head of home equity financing at RBC. "Low mortgage rates and favourable prices are influencing home purchase intentions this year and may be the reason why more Canadians are poised to purchase within the next two years."
The key question, of course, is when will all those people start translating intent into action. The next few months may provide some insight.
"Every developer in town has spent the past few months figuring out what can be done to bring people back to sales offices," Mr. Carras says. "I think this month you will start to see the result of their brainstorming."
