Isn’t it fun to watch what happens in a sinking condo market? Aside from rampant use of awkward expressions — “less upward pressure” is my favourite — we’re seeing a trend toward the special purchase incentive. A few weeks back Morgan Crossing introduced a market value guarantee to help reassure buyers that there’s nothing to fear about buying a condo. Now Tamarind Westside, the “orgasm-in-an-open-field” condo, is offering two years of mortgage payment subsidies.
The promotion is not tied to any lending institution. Basically, a buyer takes out a mortgage based on the full purchase price and the developer provides 24 months of cash subsidies. In an email, Quantum Properties president Diane Delves explains it this way:
On one of our one bedroom units at $189,900, adding in GST and CMHC fees and assuming a 5% down payment, with a variable rate mortgage amortized over 35 years, the mortgage payment would be about $879 per month. We will provide cash at closing which will enable the buyer of this unit to subsidize the payment by $237 per month for two years. This would reduce the monthly payment to $642. Similar units in our last building are renting for $900 per month so it makes a lot of sense to own, rather than rent. Even with property taxes and strata fees, total monthly costs would be under $900.
Because the promotion involves an eventual upsizing of the buyer’s mortgage payment, one can’t help but compare this incentive to a subprime loan. On closer inspection, the promo differs from subprime in that the mortgage rate does not reset — it’s the monthly credits that expire. (The lender will have approved the mortgage based on the buyer making full payments from the start.)
What’s your take? Is this a marketing gimmick or a real incentive? What kind of special offer would motivate you to buy a condo?