{"id":24022,"date":"2024-06-04T10:10:00","date_gmt":"2024-06-04T17:10:00","guid":{"rendered":"https:\/\/www.roryc.ca\/blog\/?p=24022"},"modified":"2024-06-04T07:08:33","modified_gmt":"2024-06-04T14:08:33","slug":"high-land-prices-keep-buyers-stayed-on-the-sidelines-await-on-sustained-interest-rate-cuts","status":"publish","type":"post","link":"https:\/\/www.roryc.ca\/blog\/2024\/06\/high-land-prices-keep-buyers-stayed-on-the-sidelines-await-on-sustained-interest-rate-cuts\/","title":{"rendered":"High Land Prices Keep Buyers Stayed on The Sidelines, Await on Sustained Interest Rate Cuts"},"content":{"rendered":"<p style=\"text-align: justify;\">High land prices contributed to a paucity of land deals in Metro Vancouver last year, with a new Colliers report underscoring how little values have come off for both industrial and residential development sites.<\/p>\n<p style=\"text-align: justify;\">\u201cBuyers have stayed on the sidelines as cost of land, labour, and financing makes it difficult to inject capital into projects. For example, Vancouver has seen the price per acre rise 33% since 2020 to over $4 million,\u201d Colliers reported in its survey of land markets across the country, released May 23. \u201cThis increase in cost, in tandem with long wait periods from acquisition to development, has led to only 218 acres sold in 2023.\u201d<\/p>\n<p style=\"text-align: justify;\">Residential land values peaked at $4.5 million in 2022 as transactions soared past 600 acres in the initial flush of post-pandemic optimism.<\/p>\n<p style=\"text-align: justify;\">But this remains off the peak of nearly 1,900 acres transacted in 2018, pointing to a cautious attitude among investors.<\/p>\n<p style=\"text-align: justify;\">\u201cThey\u2019re extremely price sensitive, because what pencils today, the financials could change due to cost of labour, cost of materials, financing costs,\u201d said Susan Thompson, associate director of research with Colliers in Vancouver. \u201cAny sort of legislative change on zoning requirements, that could change the equation substantially.\u201d<\/p>\n<p style=\"text-align: justify;\">While there\u2019s good demand for residential development land given the need for housing, the economics aren\u2019t working for anyone along the value chain, from developer to homebuyers.<\/p>\n<p style=\"text-align: justify;\">\u201cThey want to set their financials and go, \u2018This project is going to make money,\u2019\u201d Thompson said of developers. \u201cThere\u2019s pencils down because they just can\u2019t make the financials make sense.\u201d<\/p>\n<p style=\"text-align: justify;\">Whether or not the Bank of Canada\u2019s interest rate announcement June 5 moves the needle at all is an open question. While observers are now leaning 60% in favour of a cut, whether or not it\u2019s significant enough to bring investors off the sidelines is another question.<\/p>\n<p style=\"text-align: justify;\">The entitlement process remains challenging, Thompson notes, pointing to the need for a stabilization in development policies as well as the financing environment.<\/p>\n<p style=\"text-align: justify;\">\u201cWe need to see some stabilization in policy, and a change in the interest rates,\u201d she said.<\/p>\n<p style=\"text-align: justify;\">Similar trends are seen for industrial land, with transaction volume falling from 600 acres in 2022 to less than 200 acres last year. Meanwhile, values have stuck at $4.7 million an acre.<\/p>\n<p style=\"text-align: justify;\">\u201cIndustrial is a wild one,\u201d Thompson said. \u201cPrices per acre ran up a long way in industrial in the past few years and it has not cooled off, just because of the scarcity of land.\u201d<\/p>\n<p style=\"text-align: justify;\">A similar gap between sellers and purchasers exists in residential because of divergent expectations of value. With market fundamentals unchanged, there\u2019s no need to reduce values in the way buyers expected.<\/p>\n<p style=\"text-align: justify;\">\u201cThat\u2019s misaligned some expectations of people who were hoping to buy when the market cooled down. The prices didn\u2019t come down the way they thought they would,\u201d Thompson said. \u201cIt\u2019s more of a normalization.\u201d<\/p>\n<p style=\"text-align: justify;\">While distress sales are an opportunity, and have shown up in residential land first, Thompson said. The rest of the market has been more constrained, with few opportunities to buy and good buyer when the numbers pencil out.<\/p>\n<p style=\"text-align: justify;\">\u201cThe land market in general \u2013 industrial, commercial, residential \u2013 is just very tight compared to a lot of other markets because there is such a scarcity of land,\u201d she said. \u201cThere\u2019s a lot of pent-up capital out there that are looking for good deals. Everybody\u2019s waiting to see who\u2019s going to be the first mover and where the deals are going to get done.\u201d<\/p>\n<p style=\"text-align: justify;\">One area that\u2019s seeing activity is the Fraser Highway corridor between Surrey and Langley along the route of the planned SkyTrain extension.<\/p>\n<p style=\"text-align: justify;\">Joe Varing of Varing Marketing Group in Abbotsford has sold a number of properties in the area, among them 18375 Fraser Highway, which the province acquired March 27 for the SkyTrain project as well as an affordable multifamily housing development.<\/p>\n<p style=\"text-align: justify;\">\u201cThe Fraser Highway corridor has demonstrated some notable resilience and activity,\u201d Varing said. \u201cWe&#8217;ve observed several key developments that highlight its activity. For example, multiple new mixed-use real estate projects have been initiated in the last quarter alone.\u201d<\/p>\n<p style=\"text-align: justify;\">The SkyTrain line as well as changes to land use plans in the Tynehead, Smith and Brookswood areas have fuelled the activity.<\/p>\n<p style=\"text-align: justify;\">\u201cWhile the broader market remains flat, the Fraser Highway corridor is poised for continued growth,\u201d he said. \u201cWith several high-profile projects slated for completion in the next year, we anticipate this trend to not only continue but possibly even accelerate.&#8221;<\/p>\n<p><a href=\"https:\/\/www.biv.com\/news\/real-estate\/high-prices-kept-land-deals-in-check-in-2023-colliers-reports-8899291\" target=\"_blank\" rel=\"noopener\">Colliers Reports : High Prices Kept Land Deals in Check in 2023<\/a> by Peter Mitham | BIV<\/p>\n","protected":false},"excerpt":{"rendered":"<p>High land prices contributed to a paucity of land deals in Metro Vancouver last year, with a new Colliers report underscoring how little values have come off for both industrial &hellip; [<a href=\"https:\/\/www.roryc.ca\/blog\/2024\/06\/high-land-prices-keep-buyers-stayed-on-the-sidelines-await-on-sustained-interest-rate-cuts\/\">read more<\/a>]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8,13],"tags":[],"class_list":["post-24022","post","type-post","status-publish","format-standard","hentry","category-market-updates","category-real-estate"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>High Land Prices Keep Buyers Stayed on The Sidelines, Await on Sustained Interest Rate Cuts &#8226; Rory C Real Estate | Oakwyn Realty<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.roryc.ca\/blog\/2024\/06\/high-land-prices-keep-buyers-stayed-on-the-sidelines-await-on-sustained-interest-rate-cuts\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"High Land Prices Keep Buyers Stayed on The Sidelines, Await on Sustained Interest Rate Cuts &#8226; 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