The new condo market continued to mimic the little engine that could in May. It puffed its way in an I-think-I-can, I-think-I-can rhythm to total monthly sales of 881 units.
The downside is that sales were just over half of the 1,531 suites sold in May last year. The upside is that May was better than April's 551 sales and March's 414.
Interestingly as the new condo market continued to languish, new single-family home sales boomed in May, says George Carras, president of RealNet Canada Inc., which tracks the GTA residential market.
He says May single family sales stood at 1,708 homes, a significant jump from the 1,563 sold in May last year.
How come? No easily identifiable single reason, he says.
“It may be that people are skeptical about what the immediate future holds for condos,” he says. “It may be pent-up demand from first-time buyers either raising or about to raise a family. Coming months may provide an explanation.”
It stands to reason that if first time buyers, young singles or couples are the main force driving the condo market, then the next iteration of that group, those looking to start a family or those tired of trying to raise children within the confines of a condo, are snapping up houses.
A hint of that may be seen in the condo resale market, which is buoyant. Those who made a condominium their entry level into home ownership now find they can sell, take their profit, line up a low interest mortgage, put that profit toward the new house as a down payment and run off to suburbia.
So where does that leave new condo builders? That again is interesting. The new condo scene is not all doom and gloom and anxious developers wringing their hands over lack of buyer interest.
There are indeed some projects doing land rush business, Mr. Carras points out. As mentioned in a previous column, Fly on Front Street West between Spadina Avenue and Blue Jays Way moved 221 units in May thanks to redesigned, smaller and less expensive suites.
Another big winner was Evolution, a 13-storey, 133-suite project in the Dundas Street West and Islington area. A relaunch by builder Beaverbrook Homes May 28 saw agents, brokers, investors and ordinary buyers snap up 88 suites in a weekend. The original launch was spring of 2008 and by last fall when the bottom fell out of the market, Beaverbrook had sold about 30 units.
“In effect we sold all the suites the builder released to us,” says Debbie Cosic of In2ition Realty Corp., sales agent for Evolution.
Yes there was the usual 20 per cent in rescissions but by late June her team had still managed to sign 76 firm deals.
“The builder is delighted,” she says. “He can now get his construction financing and put all the worries of the late fall and winter behind him.”
Ms. Cosic and In2ition are on a roll. This is their sixth relaunch so far this year.
“We've become something of experts,” she says. “All of them have proved successful.”
The secret, she says, is in persuading builders to redesign projects to meet the needs of younger, first time buyers, use those redesigns to drop prices significantly, and then create an incentive package that saves buyers even more money.
At Evolution, Beaverbrook turned two-bedroom suites into singles and one-plus-dens. It got the price of its smallest suite – a 500-plus-square-foot one-bedroom – down to $169,900. Then, on the relaunch weekend offered $10,000 off suites if buyers would cough up the full 20-per-cent down payment. To make it easy, Beaverbrook offered terms: 5 per cent within 30 days of signing the purchase agreement, 5 per cent at 120 days, 5 per cent at 360 days and the final 5 per cent 30 days before closing.
Buyers could still purchase with 10 per cent down, but they would have to pay full freight. To sweeten the deal, buyers got to choose from one of three additional incentives: A suite full of furniture from the House of Teak; a year free of maintenance payments and for investors who planned to rent out their suite, a year's guaranteed rents at market rates.
“We focused on agents and brokers and on the local community, which is Eastern European and Korean in large part. We staged special events for each group,” says Ms. Cosic. “Investors were especially interested because the prices were low enough so that rental income would cover mortgages and monthly maintenance,” she adds.
“The upshot was we were able to sell everything the builder released to us.”
Builders have to accept that times have indeed changed, Ms. Cosic says. The old philosophy of “if we build it, someone will buy it” is now out the window.
“The ones that are doing well today are the ones that understand their buying market and create a product that offers such value that it is hard to say no,” she says.
