This condo developer is letting buyers put units on layaway for $1,000 a month

“We were putting our heads together thinking, what can we do here to help people who want to buy and get into the market?” said Vesna Sola, vice-president of sales at In2ition Realty, speaking at a real estate media event held by public relations firm NKPR in downtown Toronto on Friday.

“Essentially it’s like a forced savings plan.”

The Rebecca Residences in downtown Hamilton start at around $396,000 (with the new HST rebate factored in) for a 423-square-foot one-bedroom unit, and go up to just over $690,000 for an 825-square-foot two bedroom plus den, according to marketing materials. Larger units require higher monthly payments. The developer is also throwing in parking and storage lockers, as well as free roller blinds and other incentives.

Not unlike buy-now-pay-later schemes such as Klarna, the model splits up a bigger payment into many smaller ones. 

Known as pre-construction, these condos are sold before they are built.

One of the biggest “barriers” is that these deals typically require large lump sum deposit payments of about 15 to 20 per cent over 12 to 18 months, Sola said. 

“This gives people more time and bite-sized amounts to get to that 10 per cent in four years.” Asked how many they’ve sold, Sola said they are “close to” their goal and intend to start construction in the fall. The project launched in 2023. 

They’ve “had some good traction” with the deposit model, she added, including among first-time buyers in Hamilton and “tip-toe investors” — parents who are looking to buy for their adult children. 

“Fingers crossed that momentum continues and we’ll reach our threshold and start construction,” she said. 

According to promotional materials, $5,000 is due upon signing, as well as “a balance up to 10 per cent due on occupancy/closing.”

Stefano Guglietti, vice-president of highrise sales for Rosehaven Homes, added in an email to the Star that this deposit upon closing is not required by Rosehaven, but “may be required depending on the terms of the lender,” to get a mortgage for the rest of the cost of the condo.  

Condo developers usually need to pre-sell around 70 per cent of units before they can get financing to move forward with construction. 

But this model has been under pressure in recent years, with higher interest rates and lower prices.

Demand has dried up and so have sales. In the first quarter of this year, for the first time in three decades, there were zero new condo projects launched in the Greater Toronto and Hamilton Area, according to a report from real-estate market research firm Urbanation. 

Some pre-construction buyers who made deposits during the peak of the market around 2022 are now having trouble closing on their recently completed units because the value has dropped below what they agreed to pay for them. Also, the interest rates are now higher than what they thought they would have to pay on a mortgage.

Sola was joined by developers at the event, who also spoke about the current market and how it has highlighted challenges with the way that condos have traditionally been sold first and then built. 

Pouyan Safapour, president of Toronto-based Devron Developments, who has spoken to the Star before about this issue, said at the event that this model is difficult for people who want to buy condos to live in them.

First-time buyers, for example, often can’t commit to something that will not be finished for a few years.

Instead, investors became the “predominate buyers” and Toronto ended up with “relatively similar looking and feeling condos,” he said. Lots of tall glass towers, and an oversupply of tiny units. 

Sola said they recognize that people buying to live in condos, as opposed to investors, tend to want to “see something more tangible in a shorter period of time.” But they hope the four-year program makes units “more attainable.”

Ian MacLeod, senior vice-president of residential at Dorsay Development, who is working with Safapour on a new Rosedale boutique building launching the fall, also said at the event that Canada is one of the only places that sells condo units before they are built.

“There’s a general feeling that we settled for mediocrity,” in terms of design, MacLeod added. The duo is hoping to provide inspiration for more livable units with their upcoming luxury project, called 1 Marlborough, designed by Audax Architecture.

Safapour said it’s a moment of reflection for the industry, and there’s a move toward building more for people who want to live in units, rather than investors. 

“You will see a shift,” he said.