On this blog we have commented often that inner city land prices did not correct much during the depths of the horrible recession we are 'still' suffering through. This may be because of ongoing scarcity but also because the builders, as a group, can't seem to exercise common sense when it comes to buying land.
With just a few signs of economic recovery since the Trump election, such as Liberal pipeline approvals (won't have any impact on the economy in the short term), OPEC deals to manage supply (notorious cheaters will do what they always do and pump even more), and an oil price scraping along over $50, the builders have rushed back into buying land at nosebleed pricing levels. The surest way to undermine your building business is to overpay so much for land that you can't salvage any margin at the end.
The builders must know something I don't about 2017, or they just have this inherent optimism that is necessary to engage in gambling on low margin spec home projects. Land prices are now back almost to the heights of early 2014, yet the finished home market is much softer and will remain so until the job market and buyer confidence improves. Sellers have been quick to cash in on their properties and the builders more than willing to big up the few available R2 properties. This would have sold for $100k less only 8 months ago...
Christmas arrived on December 23 for this seller, as the land sold at $40k over the asking priced. I felt the asking price was already too high...