Live the subsidized lifestyle

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?

28 Responses to “Live the subsidized lifestyle”

  1. j6p Says:

    why not just lower the price. this is a scam to keep the price inflated and help the developer stay liquid. it’s an insult to any potential buyer.

  2. Quickie Says:

    Wouldn’t go so far to call it a scam. If you take the example, it’s just a $5,700 price reduction wrapped in a package. Don’t know if that makes it super deal. All depends on what you buy the unit for.

  3. jesse Says:

    Cheaper than renting…. for 2 years. I like how they have started using 35 year mortgages now instead of 40. Good for them! Also like the fine print on the $100 down thing: by the way, you need 5% down in 3 months. It’s a real incentive of about $5000 which is not much. I don’t know what “subprime” connotes for the readers here but as far as “subprime” somehow meaning higher payments in the future, this is “subprime”.

    I say gimmick and give it the thumbs down. Crush their skulls.

  4. Andrew P Says:

    I wonder if pointing out their improper apostrophe usage would yield further incentives.

  5. Condo Abbotsford Says:

    Well, its still better than renting.. If you buy right now instead of renting for the next five years… its more likely that you’ll be better off.. Are there other better deal available?….
    look here and see for yourself

  6. Sacha Says:

    Refusal to decrease the price also affects the other costs – a $5700 price reduction would also include a reduction in GST and CHMC insurance premiums, for example. Small beans compared to the total purchase price, but every dollar counts.

    Also, subtle in their advertising is the 5% down payment ($9500) and the assumption of GST/CHMC which brings the total cost up to about $203,700 (mortgage is $194,200). They are also assuming a variable mortgage rate of 4.2%, which of course can fluctuate. Finally they are using the maximum amortization period, 35 years, which results in the lowest rate.

    Using more conservative (realistic) figures, if one were to finance a $194,200 mortgage for a 5-year fixed (5.25%) and 25 years, the monthly mortgage payments become approximately $1,160. This completely blows away the “Similar units in our last building are renting for $900 per month so it makes a lot of sense to own, rather than rent.” line, even if they give you a $5700 bonus.

  7. Will Says:

    It’s a cashback at close deal which is utterly foolish. It may also be fraudulent (check that). You are, in their example, financing a home for 189,900 yet receiving cash back (about $5688) so you are really financing a home worth 184,900. I’m with anyone who ever thought “Why don’t they just lower the price?”.

    Even if it is not fraudulent you are financing the cash back to you as a loan. You are paying interest on that cash. It’s like TD’s horrible cash back mortgage (at a much higher rate than competitive loans). That extra $5688 over 35 years at 4.2% (variable so assume this number will be greater) will cost you: $10,813.58… great promotion.

    All the same, I bet it get’s some poor suckers into the showroom. Who said you needed to do any math to sign a contract?

  8. Macronomics Says:

    They don’t slash the price because that’s too overt.
    Just like at the supermarket where packages of food items get smaller but the price doesn’t change.

  9. jimbo Says:

    whether they lower the price or give you cash back, it’s clear that “prices” are coming down – YIPPEE …… Morgan Crossing is doing something similar … again – my grandma in White Rock got a flyer about subsidizing your mortgage but thye are giving you more money … close to $20K off the total price …. hopefully the prices will just start dropping

  10. Larry Yatkowsky Says:

    Another carnival huckster using smoke and mirrors. :>)

  11. jesse Says:

    “I wonder if pointing out their improper apostrophe usage would yield further incentives.”

    You mean incentive’s, right?

  12. condohype Says:

    Just looked at my web stats. This is fast becoming one of my most popular posts. Funny how as sales go down, interest in this blog goes up.

  13. Billy TwoBaulz Says:

    I say gimmick and give it the thumbs down. Crush their skulls.

    Bwah hah! I nearly spat out my coffee.

  14. Billy TwoBaulz Says:

    Here’s a related scheme from Victoria (well, not Victoria, Langford):

    http://www.liveatreflections.ca/pdf/promotions/2008_June.pdf

    Not a cash-back, mind you, but an “RRSP scheme” to get you 0% down. Not sure what they mean…

  15. Wayne Says:

    Sit tight, this too will pass. When they don’t move prices will come down. The asterisk is their way of telling us ‘this isn’t even half as good as it sounds folks’

  16. Hypester Says:

    “Well, its still better than renting.. If you buy right now instead of renting for the next five years… its more likely that you’ll be better off.. Are there other better deal available?….”

    How will a purchaser catching a falling knife by taking advantage of this amazing opportunity be better off than renting and saving? Or is this part of the real estate always goes up talking points script?

    You should also mention how prospective purchasers can rent out their abbotsford condo during the olympics!

  17. Carioca Canuck Says:

    Why not just lower the price ?

    People can read thru the BS.

  18. vreaa Says:

    ‘People can read thru the BS.’

    This campaign suggests that some can’t: They are hoping that some people are still buying according to monthly carrying cost for the immediate future.
    I agree it’s potentially fraudulent when you consider it as cash back.

  19. Condo Abbotsford Says:

    Dear Hypester,

    Read the full comment then write your response.

    Real estate is a good investment if you buy for the long term (like any other investment) and not speculate and try to time the “cycles”. If you need a home to live in, and you can afford to buy, why rent?

    If you are smart enough to buy what you need, not what you want.. You will always be ahead by buying….

    Its not always about number crunching of buy vs rent… even if renting makes sense on the calculator buying is still better for a lot of people. because you work harder, pay off your mortgage someday.. you try harder.. and after 20 years you WILL be ahead..

  20. exx Says:

    I’m sold. I’m going to stop loading up on cash while I rent for half the price of owning so that I can work my ass off and, after 25 years, be a proud owner! Or… after crunching some numbers, save up a significant downpayment as I watch property values come back down to Earth and, when I decide to buy, be able to bring my monthly payments to a level where I don’t have to work my ass off. Thanks, but no thanks.

    And if you need an example, rent for $1150 or buy the exact same unit for $375,000!.

    And if you’re still not convinced, not that you ever will be so this is just for fun, I looked at this property 3 months ago. I can only imagine that losing $70K that quick would be the equivalent of flying out to Vegas and putting down that same amount in my savings on Black. Double Zero – Hershey Squirts.

  21. Carioca Canuck Says:

    after 20 years you WILL be ahead………another fraudulent statement from the REIC.

    Wrong…….the wife and I rent…….and we have saved as much cash as someone who would have bought 5 years ago would now have in total from their equity and mortgage principal paydown combined. Wanna run the math for 35 years like your stupid mortgage deal ?

  22. Condo Abbotsford Says:

    Hey I am not trying to sell you anything by saying 20 years later you will be ahead.. sooo plz buy my listing…

    Generally speaking, that’s what happens.. People don’t save when they don’t have obligations.. Carioca Canuck, you & your wife are one of the very few people who have the discipline to do the math and do the right thing .. that’s great… And you must have invested in “something good” for the last five years to do better than someone who bought five years ago..

    I am not saying buy beyond your means.. like 0 down and 40 year mortgage… IF YOU CAN AFFORD TO BUY.. You will be ahead…there is nothing fraudulent about it…

  23. exx Says:

    Mechie, lol…

  24. scullboy Says:

    Hey Abbotsford,
    knock it off. I don’t know about the others but I come to this blog for one reason only: Reading Condohype’s brilliant “disown the lifestyle” manifestos. Nobody, and I mean NOBODY here is stupid enough to buy what you are selling. Literally.

  25. Condo Abbotsford Says:

    Scullboy, I m not selling or promoting anything here, I am not even associated with any of the projects condohype is talking about. I just have my opinion, just like you have yours. Sooo..Just Chill… Keep renting…and keep hoping that rents never go up…:)

  26. INFUNK Says:

    Just make a smart decision based on your situation. Lets put it that way and let there be peace.

  27. Befuddled by BS Says:

    Um… ah… oh. Ok. Now I get it. Kickback. As in misrepresenting the real price to CMHC and mortgage lender by doling out cash to a buyer. Geez.

    Am I missing something here?

  28. Nick Berg Says:

    Hey Condo Abbotsford,

    You realize that you get absolutely no pagerank from linking your site as the links have rel=”external nofollow” set? So all your blathering here is not boosting your search ranking at all. If you really want to contribute, why not use your real name… or at least some semi-human pseudonym? You can still link to your site if you really hope that the cynics here are looking to buy from “the condo seller”.

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