Earlier, another Canadian developer, the Cadillac-Fairview Corporation, the largest publicly held development concern in North America, suspended construction on three new luxury condominium projects with 1,000 units.
High Interest Rates Blamed
The slump in the sale of condominiums is also showing up in California and Chicago, and to to a lesser extent in the New York metropolitan area. But the problem is worst in Florida, which, with 500,000 units, is home to half the nation's stock of condominiums.
The reason for the slump, say Daon officials and other developers, real estate analysts and lenders, is a lack of demand from buyers unwilling or unable to take out mortgages at high interest rates. The only exceptions to the slump seem to be the expensive condominiums, like many in Manhattan, that attract wealthy buyers who can pay cash or qualify for mortgages, no matter what the rate is.
''The best interest rates are 13 3/4 percent and the top is 15 1/4 percent,'' said Wayne Johnson, vice president of the Arvida Mortgage Company and president of the Mortgage Bankers Association of Greater Miami. ''If the price of a condominium is $150,000, a 2 percent difference in the interest rate can make a difference of $300 to $400 a month in the payments. That's a big factor. A buyer who might be able to qualify at 13 percent might not at 14 3/4 percent.''
Mortgage rates, like all interest rates, are linked to the prime, which in the last year has gone from lows of about 10 to highs beyond 20. Buying Linked to Necessity
''People are buying new construction,'' Mr. Johnson continued, ''signing contracts and hoping rates will come down before they have to close six months to a year from now. Sales on existing construction are slow. About the only people who are buying are those who have to buy.''
Edwin J. Glickman, senior vice president of the New York-based Sybedon Corporation, and one of the developers of the Galleria condominiums, now selling for about $500 a square foot in Manhattan, agreed that while the luxury market did not seem to be suffering, high interest rates had caused ''a significant dropping off'' in the middle-class market around the country.
The warehousing of loans to purchasers is one of a number of techniques that developers are using to get expensive, empty condominiums off their hands. Some are renting all or some of their new condominium units. Others are delaying conversion or have postponed or suspended construction.
The Daon Corporation paid $14.9 million for the South Bay Club in 1979, relocated the tenants and spent $5 million on renovations. Rent for the condominiums, which were to sell for $60,000 to $120,000, will range from $450 to $1,050 a month.
''People will rent,'' said David J. Moon, general manager of Daon's residential development in Florida. ''They're just not prepared to buy.''
In Redlands, Calif., a condominium development, Redlands West, which opened a year ago, offered 80 units for rent and 104 for sale. Since then, 52 of the rental units, at $295 to $345 a month, have been occupied, but sales have been closed on only 12 of the condominiums, priced from $40,950 to $50,950. Problems in Chicago Suburbs
In the Chicago suburbs of Mt. Prospect and Itasca, where still another developer has decided to combine rentals with sales, two projects with 398 units priced from $45,000 to $55,000 had an unsold inventory of from 25 to 30 percent. However, according to Anita Lovkvist, who has handled these units for Landsmith Realty, rentals at $370 a month have raised the occupancy rate to 96 percent.
Nevertheless, for a variety of reasons, many condominium developers are unwilling to take this route. ''A rental program takes away your flexibility if the economy makes a turn-around,'' said Joe Zekas, general partner in the Condominium Equity Corporation in Chicago. ''I have seen a number of rental programs, but everybody's leery of doing it. It smells of a project being in trouble.''
Developers, said Jerry Grimaldi, director of market research for Coast Equities in Long Beach, Calif., ''don't want to hold onto these projects. They want to get in and get out. They don't want to be a landlord. Most of them will do anything and everything short of rental - anything to get out from under these things. They're giving rebates or getting into creative financing.''
