On August 7, 2013, RealNet Canada Inc. published a news release titled, “Canada’s Residential Land Markets Enter Collective Slowdown in 2013,” explaining how Residential Land sales are influenced by the performance of new housing markets.

The “collective slowdown”

Currently, the three major cities in Canada for land investment are Toronto, Vancouver, and Calgary - all of which experienced severe decreases in Residential Land investment compared to this time last year.

Toronto is showing a decline of 51% in Residential Land investment for the first half of 2013, while the low-rise and high-rise sales show a decline of 34%. RealNet believes that the low sales numbers reduce the “urgency for new Residential Land acquisitions.” Less sales means builders and developers will buy less land - it’s that straightforward.

Vancouver is showing a decline of 30% in Residential Land investments, and Calgary experienced a 52% decrease.

What does this mean for the industry?

RealNet breaks the Greater Toronto Area industry down into three categories: Low density, medium density, and high density development.

Low density land values declined by 16% in the first half of 2013. The average price of new detached homes reached $764,144, even though sales are down 39%. RealNet suggests that the decline in low density land value in conjunction with the decline in sales means that the average price of detached homes may have hit a peak. So, don’t be surprised if we see the average price of a detached home dip a little over the coming year.

High density land values have increased by 97% since 2005, but for the past 2.5 years, average condo pricing has remained steady around $577 per square foot.

Apparently, medium density land values have increased by a whopping 220% to $1,795,302 per acre, while average townhome values have increased 69% to $526,834.

While the average price of new detached homes seems to be peaking and condo prices stabilizing, townhomes have become increasingly attractive to homebuyers. Builders have no doubt taken notice to this trend, and RealNet believes that townhome values will continue to increase over the coming years.