We recently published this year’s MLA Black Book, a biannual analysis of the presale real estate market in the Greater Vancouver and Fraser Valley regions. Compiled by our Advisory team, the report offers in-depth insights into presale sales results, covering active sub-markets, development and rezoning application activity, project launches, and upcoming releases.
Of the topics covered in this report, two trends are worth highlighting: the increasing use of creative incentives for attracting homebuyers and the evolution of deposit structures.
Creative Incentives: Competing for Buyers' Attention
In the current market, the dollar value of purchase incentives remains similar to historical numbers, but their structure and psychological impact have evolved to address modern market conditions and buyers' uncertainties around presale. These are some of the common incentives we’re seeing in use:
• No Strata Fees: Homebuyers receive a credit upon completion equivalent to the strata fees they would have paid over a certain period. This helps mitigate the concerns around high monthly mortgage payments and high strata fees.
• Grow Your Deposit: Developers offer a specified percentage return on the buyer’s deposit, alleviating concerns about idle money by providing a return similar to a high-interest investment.
• Guaranteed Mortgage Rate: Developers provide a lump sum credit at completion to cover the difference between the buyer’s approved mortgage rate and a guaranteed rate, offering security against high-interest rates.
• Guaranteed Rental Income: Developers offer guaranteed minimum monthly rental revenue and professional property management services. This ensures a steady cash flow for investors upon property completion. It’s worth noting that, while the amount for this incentive seems substantial, unlike all other incentives listed, the amount guaranteed is not in the form of a credit.
Deposit Structures in Today’s Presale Market
Alongside creative incentives, developers are increasingly flexible with deposit structures to attract a broader range of homebuyers by reducing the barrier to entry a deposit can pose. Here are some common deposit options presented in today's market:
• Reduced Deposit: The typical total deposit of 15-20% is reduced to 10% for condominiums and 5% for townhomes. This makes purchasing more achievable for those with limited savings and allows investors to allocate funds elsewhere for higher returns. This also allows for a potential higher rate of returns should a homebuyer choose to assign their unit in the future.
• Extended Deposit: Developers offer extended deposit timelines, often allowing up to two and a half years for the full deposit to be paid. This makes it easier for homebuyers, especially first-time buyers, to gather the necessary funds.
• Borrowing Deposit: Some developments provide deposit financing for buyers who lack the required amount. This option, with down payments as low as 1% of the unit cost, enables individuals without immediate funds to enter the market.
The innovative use of creative incentives to attract homebuyers and the flexible evolution of deposit structures to lower entry barriers are designed to address current market conditions and buyer uncertainties, making presale investments more accessible and appealing.
For a deeper understanding of these trends and other market insights, the full MLA Black Book is an essential resource. Get the full report now for comprehensive analysis on the presale market in the Lower Mainland.
