Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

Rendering of Galleria III condominiums in Toronto.

Elad Canada

Every sort of cost related to the selling and building of new condominiums has been going up in recent years, but for hopeful buyers there are signs one of the biggest upfront costs may be going down: deposits.

As Ontario developers have sold and built hundreds of thousands of new condominium apartments over the past three decades one thing has remained constant: The deposit a buyer could expect to pay was typically 20 per cent of the total purchase price, with most if not all of that going to builders in the first year of signing the contract. Those deposits formed a keystone of the construction financing models that have allowed the Toronto region to become one of the continent’s fastest-growing condo markets.

Now, more and more builders are responding to a moment of extraordinary tumult in the market with more flexible schedules that allow a deposit to be spread out over multiple years, and in some cases effectively lowers the upfront demand to 15 per cent.

Story continues below advertisement

“In my mind there are two themes to what’s going on: One is COVID-related and one is affordability-related,” said Phil Brennen, vice-president of real estate development at Quebec-based Broccolini. The former is temporary, the latter was already an issue when Broccoloni launched its first Toronto-area condo project – River and Fifth – in 2019. “Affordability for condos and houses – particularly downtown – it’s an issue, and it’s not getting better. It’s getting worse,” he said.

With a price point that was considered a little high for an area just east of Regent Park, at about $1,100 a square foot, in 2019 Broccolini offered an attractive deposit structure for investors (those who intend to rent out a unit) and end-users (those who intend to live in the condo when it’s finished). Instead of the traditional 20 per cent in the first year, Broccolini spread 15 per cent over two years, with the last 5 per cent on occupancy. The building is more than 80 per cent sold, Mr. Brennen said.

ELAD Canada offered an extremely generous program for Galleria III when they launched sales in October, 2020.

Elad Canada

Then, in 2020 the pandemic took a bite out of the Toronto condo market. The total of 18,247 units sold last year in the region was down 28 per cent from 2019. That’s the lowest annual figure since 2013 – according to figures from real estate analysts Urbanation Inc. – and 15 per cent below the 10-year average of 21,421 sales a year.

“We’ve been seeing 20 per cent over two years for about two years now, and maybe 15 per cent was stretching to 14 months… we’ve been seeing that for quite a while,” said Eric Kuzuian, partner at the condo marketing and sales specialist firm Austin Birch. In the past flexible deposits may have been reserved for a smaller selection of units, or for projects that were priced aggressively. Now, since summer 2020 at least, it’s the new normal. “One of the first ones to come out in June – Distrikt Trailside 2.0 in Oakville – we offered 15 per cent over 18 months with 5 per cent on occupancy,” he said.

A big reason for the shift is the uncertainty: According to Mr. Kuzuian, his firm hears from buyers who could foot a $200,000 deposit but would rather keep some of that cash available on quick notice in this roiling economic moment. “Commerce is driven by confidence, you get a little bit of bad news in the media and people’s shoulders are up and they won’t part way with money,” he said.

But being flexible on deposits cost doesn’t mean you’re knocking down prices, according to Rafael Lazer, chief executive officer of ELAD Canada. ELAD has used flexible deposits in the past on some inventory, such as the largest units in a condo project that typically are the last to sell. “It was never so extensive and widespread as we do it right now,” he said. But he also doesn’t think the change will be temporary, particularly as there is increasingly demand in Toronto for family-sized units.

“Our project [Galleria III at Bloor and Dufferin] is a bit larger, we’re more family-oriented by definition,” Mr. Lazer said, with 60 per cent of the apartments one-plus-den and up. When the company launched sales in October, 2020, they offered an extremely generous program for the whole building: a 5-per-cent deposit each year for three years and the last five on occupancy.

Story continues below advertisement

60 per cent of the apartments at Galleria III are one-plus-den and up.

Elad Canada

Of course, developers don’t get to make these calls on their own, ELAD and Broccolini give all the credit to their lenders for allowing them to ease the usual terms of financing. It’s likely not an option available to every builder, particularly smaller independents, but it may already be a market expectation.

“I cannot see we would want to go back. We would want to continue … and I think other developers are trying to offer creative programs as well,” Mr. Brennen said.

Lenders and developers are also seeing signs that buyers still believe in the future of Toronto’s market.

“We know offices are empty, students are not coming, temporary employment don’t show up, but once those factors are eliminated the market will slowly level and go back to the basics … will we go back to the way it was prepandemic,” Mr. Lazer said. “People understand in 2024 or 2025 [when Galleria Three finishes] they are going to see a different market. We’re just helping them get there with less of an economic burden now.”

Your house is your most valuable asset. We have a weekly Real Estate newsletter to help you stay on top of news on the housing market, mortgages, the latest closings and more. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies