Want a Free Lamborghini With That Condo? Eh, Not Really.
It’s gotten so bad in real estate, developers can’t even give away a FREE CAR to lure buyers.
The promotions, where you get a free car with the purchase of a new condo, were popular in the spring and summer as developers realized potential buyers were going to need huge incentives to help them get over their fear of the real-estate market.
“The free-car thing is really just an attention-getter,” said Brad Hunter, chief economist at Metrostudy, a research firm that tracks the condo market.
In Jersey City, NJ, Canco Lofts, a luxury-condo development built in an old can factory, is offering a free SmartCar, worth about $14,000, with the purchase of one of 44 "penthouse" units, on the top few floors of the complex. The units run from $550,000 to $675,000.
In Seattle, they were giving away free Vespas. In Chesterland, Ohio, it was a free Ford Focus — because developer Bob Antrobius wanted to keep it all American. And in South Beach, one developer offered a Lamborghini — worth $260,000 — with the purchase of its multimillion-dollar condos.
The promotions have drawn a lot of attention, but not many sales.
Canco has only sold five of the 44 penthouse units and decided to extend the offer through the end of October to see if it drives any more sales. Antrobius said he initially sold three units with the free-car offer, but two of the deals fell through and he's not sure he's going to continue the offer. Even the Lamborghini promotion failed to deliver many sales.
Analysts say don’t expect to see any more splashy offers like this.
“People aren’t as shocked” by such a deal like they were a year ago, Hunter said. Now, all they want is a good deal on the condo — a nice discount.
And, some say, the offers do more harm than good as they skew property valuations.
“If the bank appraisal says this condo is worth $1.5 million, but you’re selling it for $1.7 million because you’re throwing in a $200,000 car … I can see how that could confuse things and squirrel the deal,” Hunter said.
But rest assured, there will be more wheeling and dealing to be had: Hunter estimates that condo prices have fallen about 20 percent from their peak a few years ago, and may fall another 30 percent in the next few years.
So, you'll probably see developers focusing more on price negotiations and offering other sweetened terms of the deal — maybe an offer that guarantees the development will be cash-flow positive for 1, 2 or 3 years.
“Fear and greed determines people’s behavior,” Hunter explained. “Fear has been the driving emotion” in the past year or so, he said, but that’s starting to shift. “I think what we’re seeing now is … greed is starting to take over again.”
Wow, I never thought I’d be so happy to see greed again.
But it does, in some perverse way, give you a sense that things are getting back to normal, doesn’t it?
To quote Gordon Gekko: “Greed is good.”