Builders bet housing boom ending as residential land investment falls
Benjamin Tal, CIBC's housing expert and deputy chief economist, wouldn't go as far as Madani in predicting a price correction of as much as 25 per cent, but he agrees the time has come for caution.
"If I was a speculator, I would not be buying," he says. "The days of flipping houses and speculating on increasing prices are clearly coming to a close. We are in the ninth inning of this boom."
"The ride must end, agrees Tal, the only issue being is will it crash or simply coast."
Developers in three of Canada’s largest markets dramatically ratcheted down their land purchases in the first half of this year.
The decision to cut back the purchase of residential land may be one of the best indicators yet that the housing industry doesn’t see a lot of room for growth in the coming years.
RealNet Canada Inc. said residential land investment in Toronto fell 51% in the first six months of the year compared to the same period in 2012. Sales in Greater Vancouver fell 30% and Calgary 52% for the same period.
“Yes, 100%,” they are looking into the future, said Richard Vilner, research manager with GTA Commercial Real Estate at RealNet. “The slowdown began to happen in mid-2012. There was a big time slow down versus those robust two years pre-slowdown. The cranes you are seeing now are for residential land deals that closed a couple of years ago.”
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