Real Estate: BEFORE and AFTER
“Gorgeous heritage B house with many original old charm features along with modern updates. 9′ ceilings, wainscoting, stained glass, pocket doors, fir floors, large modern kitchen… High undeveloped attic awaits your creative ideas. New roof and a beautifully landscaped yard.”
Above home knocked down, and this now under construction:
“..a modern and sustainable custom Henry + Glegg designed luxury home located on a south facing property in the West Dunbar neighbourhood. Features include 5 bedrooms, 6 bathrooms, automated heating, cooling and lighting controls, temp controlled wine cellar, media room, nanny suite with a walk out patio and a three car garage. This home is available now with an opportunity for interior design customization and occupancy Spring 2013.”
Personally speaking, I love older Craftsman style homes built pre -war . These old homes just exude a bygone era where quality and good architecture was a given.
In this case, the older home was demolished, and a new one under construction. Effectively, the old house had no value……hence the selling price was tied up in the lot…$2.1 Million .
From what I have been informed, the basic formula is the new house is usually priced at approx. TWICE what the lot was purchased at…and we can see this appears to be the case in the asking price for the new home…ie just under $ 4 MILLION. ( Or, don’t build a $3 Million house on a $1 million lot )
Many a builder will tell you that you made your profit the day you bought the lot. What they are referring to is timing. If we assume that the average house take approx. 6 months…the builder is hoping that the market remains hot, and that the value of the LOT will increase prior to its completion.
EXAMPLE : Several years ago I talked with a builder….and he noted that since they started construction of the current project, the lot value had increased by $ 400,000. The actual building costs ie materials and labour do not change so dramatically…and excluding the lot value the builder adds his own premium on top of his costs.
HOWEVER.…..the above lot on W 37th Ave. was sold approx. one year ago…and was probably at or near peak price. The builder appears to be seeking peak price for the finished product. However, the market is shifting dramatically. We are hearing warning signs from realtors that unless people are prepared to make major cuts in asking prices(usually peak prices as a base reference )…ie 25%…then their homes won’t sell.
If we apply this to the above example…this builder ” may” get approx. $3 Million (???) in the current market…., which I would interpret as they have lost any hope of profit. If they have not sold soon, they will have to wait for the next buying season ..ie in April..6 months away . In all likelihood, they will be part of a large group of builders who over – estimated the market BIG time. Then it gets ugly…a Mexican standoff – of who is going to start to chase the market down……keep cutting prices to get rid of their product….and unfortunately one can anticipate many of them going bankrupt.
Actually, one of my neighbours told me the story of when he bought his house…built new in 1990…..the market had tanked, the builder was stuck….and he bought the new home for 40% less than asking price.
Its gonna get ugly folks….