Not Enough Building Lots
Are you seeing a trend yet? We already know we have (and are going to continue to) not have enough resale homes due to a multiple of factors. Adding to that, we are going to see a shortage of building lots for the people looking to build new. Yes, just like with resale, some houses don’t garner a lot of interest, the same can be said for lots. Under 1000 available building lots available over the next 2-3 years may seem like a lot, it really isn’t. Half of which are controlled by one developer. Short mulitple listing service inventory (listed properties for sale), shortage of lots, mean overall inventory will be deminishing over the next 2 years. So how will this affect us in London?
Rise in Prices
Let’s use 65′ lots backing onto the woods in Riverbend as an example. In 2007/08, you could have bought one for about $130,000. That same lot today is about $260,000. Home prices in London have not doubled over that period. As an example, I purchased my first home in London in 2006 for $153,000. Over the time we lived in it, we significantly improved it, and it sold at the end of 2016 for $230,000. Extremely small sample size. That being said, comparable properties sold with a gain of 2-2.5% a year for the first 8 years we owned that house. They last 2 years saw a considerable jump (closer to 7%) in pricing in a short period of time. Fewer new homes available for sale, fewer resale homes available are only going to push average home prices higher in London. The City of London is also attempting to issue more infil building permits, which makes it a lot more difficult for large scale development.
The HGTV Effect
Another effect is the fact more buyers want HGTV ready homes, or homes that require no work, at all. New homes are becoming more and more popular, and we see some first time buyers saving for longer, to be able to afford the new build home for the first home. Another shift we are seeing, is the move toward modern building design. WIth this you almost need a new build, becasue the cost of renovating the outside of a home as well as inside is significant, to a point most people are not willing to do it. Will this lack of availble properties to buy cause any further issues elsewhere? I’m glad you asked. It will also cause an issue with vacancy rates. With less homes available to buy, people continue to rent, meaning investment properties become more popular, and that’s what we will talk about in Part 5.