The Greater Toronto Area has just posted a record decline in sales of land for future residential developments, suggesting that home and condo builders are reacting to the decrease in housing sales by tempering their appetite for new construction.
Investments in such land fell 45 per cent from the fourth quarter of last year to the first quarter of this year, according to new data from RealNet Canada Inc.
"This is the largest quarter-to-quarter decline we've ever seen in residential land, even through the financial crisis," said George Carras, president of RealNet. "It's the biggest hit-the-brakes we've seen in land investment."
The drop follows a downturn in sales of new houses and condos. New home sales came in at 2,030 for the Greater Toronto Area in February, down from 2,609 in February of 2012 and 3,688 in February of 2011, according to RealNet data.
While house sales have been falling for some time now, land sales kept up their momentum until this year, Mr. Carras said.
Home builders have also been talking about a lack of available land for new detached homes, largely due to government actions aimed at curbing urban sprawl.
The gap between the price of newly constructed low-rise homes and condos widened to a record in the first quarter, according to RealNet. Its high-rise price index rose 2.6 per cent from a year ago to $432,631, while its low-rise price index rose 10.9 per cent to $639,321. The gap, which has been widening each month since the end of 2010, now sits at $206,690. The average price gap prior to December, 2010, was $75,806.