One Toronto real estate agent recently received a call from an owner who is planning to sell his unit in Cinema Tower.
The building near King and John streets is partner to the Festival Tower atop the glamorous TIFF Lightbox, imbued with the cachet of the Toronto International Film Festival.
A few questions from the agent revealed that the owner paid about $450,000 for a one-bedroom unit with no parking and no storage locker.
The agent could only shake his head.
“You paid nearly half a million for a one-bedroom with no parking? What were you thinking?”
The agent asked that his name not be used because he didn’t take the listing. If the seller expects to pocket a profit – or even break even – the agent doesn’t think he can deliver. He is reluctant to be stuck with an adamant client and a condo that won’t sell.
“I’m a very active agent in the downtown core and I don’t have a buyer for this,” he explains. “And if I don’t, I don’t know who will.”
The story reveals one dynamic in the condo market right now: The investors who jammed sales centres a few years ago buying condos long before they were built are now confronting a soft market. In this particular building, a handful of units were for sale last week in the same price range. The developer is still trying to sell never-lived-in units that didn’t find a buyer while the tower was under construction.
And that’s just the market for buildings already standing. Meanwhile, projects are regularly being launched with sales incentives, distinctive architecture or novel amenities to make them stand out.
For selling agents and condo owners, the current market means they must be more willing to make their units stand out – with more impressive photographs, immaculate staging and aggressive marketing. When a buyer does put an offer on the table, he or she will most likely be expecting to haggle.
In a former heritage bank building at Eglinton and Avenue Road, a traditional real estate brokerage has been rebranded as the Condo Mall.
The venture’s director of business development, Adam Sax, takes a visitor on a tour of the sales office, which resembles a chic lounge. Prospective buyers can sip lattes at high-topped tables. Sixty-five-inch touch screens display projects from Tridel, RioCan, Bazis, Monarch and other developers.
Mr. Sax says developers who would have shunned his concept in the past are more receptive to finding new ways of reaching buyers in the current environment.
“Any time a market is seeing any vulnerability, you need to be thinking more creatively.”
Typically in Toronto, prospective buyers have visited builders’ sales centres to see a new project and meet with sales representatives.
“It’s very intimidating. It’s not a nice environment,” he says. “They have one option and their primary goal is to sell you that option.”
Mr. Sax believes buyers are still looking for condos but the market is much more competitive these days. His agents have access to more than 200 projects currently for sale in the city.
On the touch screen, he brings up E Condos, which is slated for construction at the corner of Yonge and Eglinton. The glass-walled swimming pool on the 32nd floor adds drama to this project.
This building is attracting a lot of people who actually plan to live in the units, he says. The most popular floor plan is 722 square feet, including the balcony. Investors like to buy units between 360 and 460 square feet. That’s a little bigger than a standard hotel room.
Many projects coming on stream have units of that size, he says, as builders cram as many units as they can into a building.
Other developers are raising the bar with landmark architecture. The Daniel Libeskind-designed L Tower figures prominently in the skyline and David Mirvish is steadfastly seeking approval for Frank Gehry’s vision for a stretch of King Street.
“There’s some really incredible stuff coming to the market over the next few years,” says Mr. Sax.
For more prosaic appeal, many developers are offering such incentives as free parking, two years’ free maintenance, or cash back of up to $50,000.
One builder negotiated a deal to buy Mercedes-Benz models in bulk. They gave one to each purchaser of a unit.
Builders often create hype at new launches by sending out invitations for special events.
“Before the public ever has the opportunity to buy, units are sold to people who have access to them,” Mr. Sax says
After the first few months, it’s difficult for developers to woo prospective buyers, who tend to have a short attention span. The most desirable units are purchased early on.
“The investors, after six months, are already gone. They’ve already come in and eaten up as much of the project as they can.”
As for overseas investors, Toronto-based real estate agents report that purchases by foreign buyers have slowed but not vanished.
Shanghai-based Juwai.com still sees room for growth: The real estate web portal says that Canada is the world’s fourth most popular country for Chinese property investors. Furthermore, interest in Canada grew in the third quarter of 2013.
Juwai.com co-chief executive Andrew Taylor says Chinese interest in Canada comes from so-called “push” factors such as a relatively high Chinese currency, a scarcity of good real estate investment opportunities in China and a desire to diversity assets. It also comes from “pull” factors such as Canada’s stable economy and political system, and the country’s well-managed real estate market.
“Our interactions with Chinese buyers tells us that their interest in Toronto condos remains strong,” Mr. Taylor says in an e-mail. “They are relatively unaffected by the changes in mortgage rules because they obtain financing in Canada much less frequently than domestic buyers.”