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.

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Guest
frank
2 years 7 months ago

How about just reducing the price, Mrs McMarketter?

Guest
Naked Official Returns
2 years 7 months ago

so condos are cheap lingerie

Guest
DeeplySaddenedwithYankeeRoots
2 years 7 months ago

Not directly relevant to the posted subject (but directly relevant to the quality of all of our lives, so I make no apologies), but I just wanted to ask, how is a background in “real estate investment” relevant experience for an ambassadorship to a European country? ““It is an outrage. It is an abuse. It is a violation of the conventions and agreements of international air transportation,” Saavedra said. Bolivian Vice President Alvaro Garcia went so far as to say Morales had been “kidnapped by imperialism.” … The report in Die Presse is the only report to name Eacho as… Read more »

kabloona
Member
kabloona
2 years 7 months ago

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….

:-)

Guest
Low Rates
2 years 7 months ago

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… Read more »

Guest
Joe Mainlander
2 years 7 months ago

@ 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.

Guest
elvince
2 years 7 months ago

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… Read more »

Guest
Low Rates
2 years 7 months ago

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.

Guest
elvince
2 years 7 months ago

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,… Read more »

Guest
Low Rates
2 years 7 months ago

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… Read more »

Guest
Serene
2 years 7 months ago

I noticed that huge yacht in North Van as well. Why are Billionaire yachts coming to Vancouver. That one is big as a freakin cruise ship.

439 feet long. 2 helicopter pads.

Apparently the Russian Tycoons are in town to buy RE. I kid you not!

Guest
Serene
2 years 7 months ago

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.

Guest
Son of Ponzi
2 years 7 months ago

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

VMD
Member
2 years 7 months ago

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..

Guest
Son of Ponzi
2 years 7 months ago

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.

chilled
Member
chilled
2 years 7 months ago

Son of Ponzi Says:
July 8th, 2013 at 10:45 am 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.

+++++++++++++++

It won’t be a surge, but a parked van packed with fertilizer and diesel fuel.

Guest
Son of Ponzi
2 years 7 months ago

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

Guest
Manna from heaven
2 years 7 months ago

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?

Guest
Joe Mainlander
2 years 7 months ago

@ 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”

Guest
BulbsForSale
2 years 7 months ago

#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… Read more »

Guest
barb rennie
2 years 7 months ago

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.

Member
Devore
2 years 7 months ago

@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.

Guest
Hibernating Renter
2 years 7 months ago

“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.

Guest
Son of Ponzi
2 years 7 months ago

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.

Guest
BulbsForSale
2 years 7 months ago

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’?

Guest
bullwhip29
2 years 7 months ago

@ 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… Read more »

Guest
The Helmet
2 years 7 months ago

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.

Member
JD
2 years 7 months ago

@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?

Guest
mosesupposes
2 years 7 months ago

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?

Guest
The Helmet
2 years 7 months ago

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.

paulb
Member
2 years 7 months ago

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

http://www.paulboenisch.com

Member
Best place on meth
2 years 7 months ago

Happy 18K…..again.

Member
JD
2 years 7 months ago

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?

Member
JD
2 years 7 months ago

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

Member
JD
2 years 7 months ago

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

Member
2 years 7 months ago

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… Read more »

Member
2 years 7 months ago

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

Guest
@YLTNboomerang
2 years 7 months ago

wow, cool story bro. now if only the name of this blog was calgarycondo.info, we’d have something.

Guest
George Soros
2 years 7 months ago

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.

Guest
emmi
2 years 7 months ago

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

Guest
emmi
2 years 7 months ago

@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.

Guest
RE Canary
2 years 7 months ago

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.

Guest
Son of Ponzi
2 years 7 months ago

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.

Guest
Serene
2 years 7 months ago

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.

Guest
barb rennie
2 years 7 months ago

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?

Guest
Son of Ponzi
2 years 7 months ago

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.

Guest
Romeo Jordan
2 years 7 months ago

pace of the decline is frustrating.

but the direction is invigorating – down!

Guest
canadian
2 years 7 months ago

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 .

Guest
Larry
2 years 7 months ago

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

Guest
Son of Ponzi
2 years 7 months ago

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

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