Hidden price drops now called ‘incentives’

Looking for a new condo?

If you are it looks like you’re getting to be a rarer species and to catch your eye marketers are trying all sorts of things short of just dropping the price.

How about a ‘free’ car or $1000 off your monthly payments for a year?

Or if you’re a believer in the power of a good sales person, then a $5000 bonus to the realtor might do it.

These are just a few of the incentives that developers and marketers are using to get attention or avoid going directly to the price drop.

But are these hard sell techniques working? And will they help kick start a sagging industry?

“We have to be careful before saying ‘the sky is falling,’” says Diana McMeekin of real estate marketing firm Artemis. “What we’re seeing in the market today is a response to the shift from speculators to long-term investors. The kinds of people that are buying now are owner-occupiers as opposed to ‘flippers.’”

For that demographic, real estate is “less of a commodity and more of a home. Their decisions are often more measured,” she says, and they are more likely to be enticed by deals. “Their decisions are more emotional and less about dollars and cents.”

While Ms. McMeekin says our condo market is not as glutted as Toronto’s, she still advises clients that in a competitive market, especially in areas such as Metrotown and Richmond, “you need to have a promotion or special offer every day – just like in the retail business.”

Read the full article in the Globe and Mail.

52 Responses to “Hidden price drops now called ‘incentives’”

- ♦ ↓ ↓ ↓ Click here to leap to comment form ↓ ↓ ↓ ♦ -

    How about just reducing the price, Mrs McMarketter?

    Well-loved. Like or Dislike: Thumb up 49 Thumb down 1

    Naked Official Returns Says:
    2

    so condos are cheap lingerie

    Like or Dislike: Thumb up 6 Thumb down 2

    DeeplySaddenedwithYankeeRoots Says:
    3

    Hidden due to low comment rating. Click here to see.

    Poorly-rated. Like or Dislike: Thumb up 7 Thumb down 15

    kabloona kabloona Says:
    4

    So what…? Our PM recently appointed some dude named Bruno – his his ex-bodyguard – as Ambassador to Jordan.

    http://www.thestar.com/news/canada/2013/04/19/rcmp_bodyguard_for_stephen_harper_to_be_ambassador_to_jordan.html

    Next, I believe he’s naming his hairdresser as Ambassador to Liechtenstein….

    :-)

    Well-loved. Like or Dislike: Thumb up 32 Thumb down 5

    Low Rates Says:
    5

    Incentives and outright fraud. When factual returns on all types of investments are very low, and central banks follow suit, enterprises involved with return of investor capital spring up like mushrooms in manure. By return of investor capital I’m talking about the continuum of ponzi schemes from the illegal to the not yet illegal – like overpaying for real estate with taxpayer insured loans which will result in decades of outlays higher than equivalent rent.

    The answer is to have higher interest rates that drive out the ponzi element. Only enterprises that can provide factual returns will have any investors in a high interest rate environment. This point is never acknowledged by central bankers. Central bankers think regulation works the same no matter how interest rates are set. Unfortunately the regulations we have were developed when much higher interest rates were normal. Central bankers don’t get it.

    Well-loved. Like or Dislike: Thumb up 29 Thumb down 3

    Joe Mainlander Says:
    6

    @ frank #1 “How about just reducing the price, Mrs McMarketter?”

    You’d think that would make sense. Perhaps, it’s so the closing prices are higher and the stats won’t show any RE price drops.

    Or, as developers need to pre-sell a certain % of the project to get financing, perhaps the higher closing costs keep the banks happy, and instead they have to use these gift back/cash back deals.

    Hot debate. What do you think? Thumb up 16 Thumb down 0

    elvince Says:
    7

    real estate is “less of a commodity and more of a home. Their decisions are often more measured,” she says, and they are more likely to be enticed by deals. “Their decisions are more emotional and less about dollars and cents.”

    How does she even reconciles these statements? How can someone make measured decisions enticed by deals but have these decisions be more emotional and less about the dollar?

    Do these would-be journalists at the G&M even read their articles before publishing them? Every newspaper has bad papers from time to time, but this one quote is a bottomless pit of stupidity.

    There is anothe “gem”:George Wong, for one, believes there is no crisis – “just an explosion of supply in certain areas that has created a buyer’s market.”

    in one word: POP!

    Well-loved. Like or Dislike: Thumb up 36 Thumb down 0

    Low Rates Says:
    8

    http://globalnews.ca/news/700634/end-of-the-line-for-kelowna-pacific-railway/

    More layoffs. Central bankers don’t like that but it is inevitable. Putting off the inevitable closure of obsolete enterprises makes everyone poorer. Soviet Russia had all sorts of factories producing out of fashion stuff that nobody wanted and their system eventually collaped.

    Bernanke, Carney, and the rest keeping brain dead enterprises alive on low interest rates are dooming everyone living today to a lower standard of living for the rest of their lives.

    Hot debate. What do you think? Thumb up 19 Thumb down 2

    elvince Says:
    9

    And I think someone at CNN.com is reading this blog:
    http://money.cnn.com/2013/07/08/real_estate/chinese-homebuyers/index.html

    Most of her Chinese clients are wealthy industrialists or real estate tycoons, many of whom spend less than half the year in the States.

    Getting visas on the cheap seems to be easy in the US too!

    Many Chinese buy homes through the U.S. government’s EB-5 Immigrant Investor program, which is considered a fast-track to getting a green card. To qualify, foreigners must invest at least $500,000 in a business that provides or preserves 10 jobs. This could be a home that is part of a bigger business project, such as a condo complex. Nearly 80% of all EB-5 visas went to Chinese nationals in 2012, according to the government.

    Hot debate. What do you think? Thumb up 16 Thumb down 0

    Low Rates Says:
    10

    US EB-5: “invest at least $500,000 in a business that provides or preserves 10 jobs”

    True, but unlike Canada, if the US EB visa business goes belly up the investor loses all their money. The stupid system we have in Canada has the investment guaranteed by the government and paid back in full no matter what. The same 500k is often recycled to friends of those immigrants who use the same funds again to create more investor visas.

    As well, these so called “investors” in Canada are little more that economic social climbers who create no jobs for anyone else except perhaps Philipino slaves they bring with them from China to tend to their property and children. It’s a disgrace really. These people should be rounded up, revoked, and put on the next plane back to China.

    Well-loved. Like or Dislike: Thumb up 55 Thumb down 3

    Serene Says:
    11

    Hidden due to low comment rating. Click here to see.

    Poorly-rated. Like or Dislike: Thumb up 2 Thumb down 15

    Serene Says:
    12

    Canada’s Investor Immigration program is a joke. Th money can even be lent from a bank and they just charge you interest at 3-4% per year. There is a 7 year backlog in Investor applications. So another 150,000 more families in the pipeline.

    Hot debate. What do you think? Thumb up 20 Thumb down 1

    Son of Ponzi Says:
    13

    “in the pipeline”
    I understand that they are shipping them now in rail cars.

    Hot debate. What do you think? Thumb up 11 Thumb down 5

    Fraser Valley RE Stats:

    Sales: (3 out of 22 business days)
    July 2013: 152 (-46%)
    July 2012: 279

    – This seems a little dramatic, will update once more stats available in a week or two..

    Well-loved. Like or Dislike: Thumb up 38 Thumb down 0

    Son of Ponzi Says:
    15

    Was at The Flying Beaver Bar and Grill this weekend.
    Great place right on the Fraser.
    At one point, the conversation on our table turned to how high the water level of the Fraser was.
    It seems that a surge of about 2 feet would break the dyke and flood the airport.

    Hot debate. What do you think? Thumb up 18 Thumb down 1

    chilled chilled Says:
    16

    Hidden due to low comment rating. Click here to see.

    Poorly-rated. Like or Dislike: Thumb up 4 Thumb down 14

    Son of Ponzi Says:
    17

    Serene # 11.
    2 helicopter pads. What color were the helicopters?

    Hot debate. What do you think? Thumb up 19 Thumb down 2

    Manna from heaven Says:
    18

    Sounds like NZ officials are burying their heads in the sand just like they are here in Canada. Lots of similarities between Canada’s and NZ’s RE market, particularly Auckland and Vancouver. RE in Canada and NZ are the third and fourth, respectively, most over-valued in the world, according to the OECD.

    http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10895526

    Is anybody out there listening?

    Hot debate. What do you think? Thumb up 12 Thumb down 0

    Joe Mainlander Says:
    19

    @ Manna: Yes… the 35% who don’t own are listening. The 65% who own are covering there ears and saying “nya nya nya I can’t hear you, I’m a millionaire”

    Hot debate. What do you think? Thumb up 20 Thumb down 3

    BulbsForSale Says:
    20

    #7 Elvince. I also thought that was a weird blatant conflict of common sense, then I ran it through the real estate market translator:

    real estate is “less of a commodity and more of a home. Their decisions are often more measured,” she says, and they are more likely to be enticed by deals. “Their decisions are more emotional and less about dollars and cents.”

    English:

    There are few buyers available and they are in less of a panic to buy so their buying decision is slower. They are however not too bright and can still be enticed by marketing tricks. So rather than dropping your price $50k buy a $15k car and give it away for ‘free’ with a purchase.

    Well-loved. Like or Dislike: Thumb up 27 Thumb down 0

    barb rennie Says:
    21

    The listing prices are really coming down in Richmond. I have noticed much more lower priced listings this past week. This may indicate the start to a downward price trend. Yet, buyers still aren’t jumping with offers. I don’t think it is due to buyers not wanting to buy, but local buyers just don’t have the cash.

    Well-loved. Like or Dislike: Thumb up 26 Thumb down 2

    Devore Says:
    22

    @elvince: I too was thinking wtf. But I am sure it makes perfect sense when you’re a true believer.

    Also this “What we’re seeing in the market today is a response to the shift from speculators to long-term investors.” It’s only a “shift” when the speculator buyers are replaced with long term and owner buyers, who supposedly make measured decisions while being emotional. But what we have today is just a shift to fewer buyers.

    Hot debate. What do you think? Thumb up 10 Thumb down 3

    Hibernating Renter Says:
    23

    “What we’re seeing in the market today is a response to the shift from speculators to long-term investors. The kinds of people that are buying now are owner-occupiers as opposed to ‘flippers.’”

    My, my. Not so long ago we were told that there is no bubble because the market is made up entirely of long-term investors. How the past has changed.

    Well-loved. Like or Dislike: Thumb up 36 Thumb down 1

    Son of Ponzi Says:
    24

    b.Renie,
    The prices are really coming down in Richmond.
    I noticed the same thing. Nothing over a 1 million is selling.
    There are a few nice houses in prestigious Westwind for around 800k which have cost 1.2 mill just a year ago.

    Well-loved. Like or Dislike: Thumb up 28 Thumb down 2

    BulbsForSale Says:
    25

    I don’t want to jinx it, but whatever changes happened to the comment system here seems to have really helped the signal to noise ratio since yesterday.

    On the incentives, is ‘$1000 a month for the first year’ really a way to get buyers? Are there any buyers that wouldn’t say ‘just give me $xx off the price’?

    Like or Dislike: Thumb up 8 Thumb down 1

    bullwhip29 Says:
    26

    @ Joe Mainlander July 8th, 2013 at 8:55 am

    This probably does skew the stats, but anyone that believes these aren’t doctored at the best of times is a fool anyway. FWIW, the banks and CMHC use the net price when vetting their deals, so this is nothing but a marketing gimmick done to enhance the optics. At the some point this will end as buyers get completely fed up with the nonsense, the incentives become so huge that some regulatory body is required to step in and take charge of the matter or the taxman simply ramps up the audits on purchasers of incentive laced property deals like this. When it comes to the latter, I’m sure there are all sorts of shenanigans going on with respect to the disposition of the so called “free” cars and/or improper ACB/capital gain declarations made on tax returns when properties are sold.

    Like or Dislike: Thumb up 3 Thumb down 1

    The Helmet Says:
    27

    Friends of mine bought New West 1000sqft presale condo recently, they were offered 10% in cash back incentives and an 18month rate hold (4.1% 5yfixed) until near the expected closing date.

    There is immense pressure not to drop the price, in my view because price drops allow previous buyers to complain and demand the reduced prices for themselves.

    The presale price I mentioned, with incentives, is starting to approach a 150 price-monthly-rent ratio.

    Well-loved. Like or Dislike: Thumb up 27 Thumb down 0

    @the Helmut
    How do you get 150?
    My math is as follows:
    Nice new west place at 1000sft is about 1800 ish / month.
    Subtract 250 for strata is 1550.
    150 x 1550 = 232,500.
    Seems low for new west?

    Hot debate. What do you think? Thumb up 11 Thumb down 0

    mosesupposes Says:
    29

    So there’s this property (V1015028)that is first listed last week for $1.19m (I think, it was definitely under $1.2m)that is now listed for $1.225m less than one week later.

    What’s the deal? I figure either they got a bunch of action and are simply trying to keep a bidding war going or they got a bunch of what they thought were low ball offers and they think low balling from $1.225m is going to result in a better number than low balling from $1.18m.

    Any thoughts why a listing would go up $40K or so after one week?

    Like or Dislike: Thumb up 5 Thumb down 1

    The Helmet Says:
    30

    JD28, I am assuming $1800/month rent. This is not cap rate, this price divided by gross rent. Compared to a few years ago it was over 200. With recent drops, rent increases, and the added incentive, prices are coming down. I still think there is a ways to go but I also think we are on the trail.

    Like or Dislike: Thumb up 2 Thumb down 1

    New Listings 326
    Price Changes 163
    Sold Listings 165
    TI:18022

    http://www.paulboenisch.com

    Well-loved. Like or Dislike: Thumb up 91 Thumb down 1

    Best place on meth Says:
    32

    Happy 18K…..again.

    Well-loved. Like or Dislike: Thumb up 42 Thumb down 4

    Even at 1800 without subtracting strata, we get 150 x 1800 = 270k for 1000 sft. Prices sure have come down if this is available.
    Which development is this?

    Like or Dislike: Thumb up 8 Thumb down 1

    Happy 18k!
    When did we hit 18k last time?

    Hot debate. What do you think? Thumb up 11 Thumb down 1

    Seems to me that rents are coming down in Richmond. Not sure about the new west market.

    Like or Dislike: Thumb up 4 Thumb down 1

    YLTNboomerang Says:
    36

    So I’m in Calgary this week, not for stampede, but to introduce our newest hire to key customers and had the following conversation that started after I explained the accrual of dividends on our corporate option awards at our end of day de-brief over a pint:

    Me: dividend accrual is a great perk but it scares the crap out of me how much I am exposed to the company…paycheck, rsp, dsu’s, options etc and I just don’t have the time to do my own research anymore so I keep buying company shares as I know we are still on a good trajectory

    Him: what about mutual funds?

    Me: ugh, largess! I went with a fee based advisor, no transaction fees, I provided my guidelines (do not invest in precious metals for example) and check back every 6 months tomre-assess strategy (it was tough letting go but you gotta give these guys a chance for their strategy’s to play out).

    Him: don’t you need at least 250k for those?

    Me: yes… Then I felt bad as I realized that despite the fact he should have liquid assets in excess of 250k at his life stage perhaps I should not have talked about this.

    Me: but, you know, I rent so all my equity is not tied up in a house (thought this would make him feel better as I know he is a home owner and probably has equity there).

    Him: I wish I rented when I moved here (yyc) in 2003 as I’m still underwater.

    Me: you got flooded? That sucks; you had insurance right?

    Him: No, I didn’t get flooded but my place is worth less now than I paid for it 10 years ago. Not really underwater in the “owe more than it is worth” sense but 10 years of having his entire net worth tied up and not providing a return!

    …and Alberta is the bright spot for our national housing market? Wow!

    Hot debate. What do you think? Thumb up 21 Thumb down 3

    YLTNboomerang Says:
    37

    Sorry for poor grammar and spelling above; I don’t type well on apple products

    Hot debate. What do you think? Thumb up 9 Thumb down 2

    @YLTNboomerang Says:
    38

    Hidden due to low comment rating. Click here to see.

    Poorly-rated. Like or Dislike: Thumb up 1 Thumb down 25

    George Soros Says:
    39

    Inventory on July 9 of last year was 19,053 or about 5.5% higher than today.

    Inventory July 31/12 19,188

    Inventory Aug 30/12 18,899

    It will be interesting to see if we can make up ground and actually be above the July 31/12 level by the end of the month. A few more days like today and it might happen.

    Hot debate. What do you think? Thumb up 15 Thumb down 2

    @29, maybe they want to leave room to have a big “price reduced” promotion on it.

    Like or Dislike: Thumb up 4 Thumb down 0

    @39 Inventory is a measure of churn without choice, desperation, and future outlook. It takes 18 months for a turn in the real estate market to take hold in the general consciousness. Given that the last time the market fell, it went right back up again, I’d guess that there will be more resistance to seeing the turn in the market this time around.

    Like or Dislike: Thumb up 6 Thumb down 1

    RE Canary Says:
    42

    Wow 163 price reductions.
    Remember what I predicted a month ago, that the number of price reductions is the one to watch.
    Lower prices lead to even lower prices as sellers are realizing that the buyers are in the driver’s seat now.
    Over 18,000 of units on the market, as per MLS.
    No one knows what the shadow inventory is, but a guesstimate of about 5,000 seems reasonable.
    The buyers have lots of choice and can be patient.

    Hot debate. What do you think? Thumb up 13 Thumb down 8

    Son of Ponzi Says:
    43

    1,800 rent for a condo in New West, the Congestion Capital of the Lower Mainland!
    Either there are some really stupid renters out there, or this story is a fake.
    I go with the latter one.

    Hot debate. What do you think? Thumb up 11 Thumb down 2

    Serene Says:
    44

    Post 42

    Shadow inventory?? Was there a crash i missed and Banks are holding onto millions of foreclosures? Let’s get back to reality son.

    Hot debate. What do you think? Thumb up 10 Thumb down 7

    barb rennie Says:
    45

    In Richmond today:

    50 new listings
    33 new price reductions

    We keep going like this on a daily basis, the inventory will be going through the roof. What was that thing I heard about supply and demand?

    Hot debate. What do you think? Thumb up 11 Thumb down 3

    Son of Ponzi Says:
    46

    Serene 42,
    Shadow inventory = units for sale but not listed on MLS.
    Example: Townhouse project with 24 units for sale, but only 2 are listed on MLS.
    Other examples: Presale assignments, Private sales.

    Hot debate. What do you think? Thumb up 8 Thumb down 3

    Romeo Jordan Says:
    47

    pace of the decline is frustrating.

    but the direction is invigorating – down!

    Hot debate. What do you think? Thumb up 5 Thumb down 5

    canadian Says:
    48

    I know this is off topic but if you do buy a home ,make sure its not located close to a rail line .Unbelievably trains are left unattended idling all the time in Canada .

    Like or Dislike: Thumb up 4 Thumb down 3

    Larry Says:
    49

    Oil is still over 100 buck, no worries for RE in Canada.

    Like or Dislike: Thumb up 2 Thumb down 7

    Son of Ponzi Says:
    50

    I know, oil is going through the roof . Of rail cars.

    Hot debate. What do you think? Thumb up 2 Thumb down 9

    Many Franks Says:
    51

    The soft-landing squeeze: Ottawa’s mortgage fixes one year later:

    Jonathan Coe is anxious to get out of his west-end Toronto apartment and into his first house, but that dream was put on hold again last year when the federal government changed the rules.

    [...]

    Jonathan Coe, a self-employed website developer, is almost 40, single, and anxious to move out of his apartment in Toronto’s west-end Parkdale neighbourhood and buy his first house.

    [...]

    Jonathan Coe, a self-employed website developer, is almost 40, single, and anxious to move out of his apartment in Toronto’s west-end Parkdale neighbourhood and buy his first house.

    And at the top of the page, an advertisement urging me to pay for this Groundhog Day experience.

    Like or Dislike: Thumb up 4 Thumb down 0

    Fantastic Post.many thanks for share… expecting more.

    Like or Dislike: Thumb up 0 Thumb down 0

VCI Network

  • Take a Peak.

    The Vancouver Peak Discussion Forums are now open for collecting stats, sharing data, etc. Please register at the new site and let us know what you think.
Leap to comment form