If land values are a residual, determined after all the costs (now higher than ever) and revenues (seems to have hit a ceiling) of development, then should we start to see site acquisition prices decline to the point where projects begin to be viable again? Or are land prices sticky and in a sense only partly residual?
On pre-sales, interesting point here (https://gellersworldtravel.blogspot.com/2025/08/cbc-early-edition-ways-to-advance.html) suggesting that banks used to do more conventional underwriting for condo development financing, but then pre-sales emerged as a marketing strategy and once banks saw that play out successfully their underwriting changed to increasingly rely on pre-sales. Not sure how to change that dynamic.
"If land values are a residual, determined after all the costs (now higher than ever) and revenues (seems to have hit a ceiling) of development, then should we start to see site acquisition prices decline to the point where projects begin to be viable again?"
Unfortunately I think it's the other way around. High land values are what provides the incentive to redevelop. When land values are down, nothing happens. (Conversely, if we figured out some way to radically improve construction productivity, bringing down costs, this would result in higher land prices and much more redevelopment.) https://morehousing.substack.com/p/land-sales-down
Thanks for the pointer to Michael Geller's post. He makes sensible points, but I don't know how you would convince lenders to forgo the presales requirement.
If land values are a residual, determined after all the costs (now higher than ever) and revenues (seems to have hit a ceiling) of development, then should we start to see site acquisition prices decline to the point where projects begin to be viable again? Or are land prices sticky and in a sense only partly residual?
On pre-sales, interesting point here (https://gellersworldtravel.blogspot.com/2025/08/cbc-early-edition-ways-to-advance.html) suggesting that banks used to do more conventional underwriting for condo development financing, but then pre-sales emerged as a marketing strategy and once banks saw that play out successfully their underwriting changed to increasingly rely on pre-sales. Not sure how to change that dynamic.
"If land values are a residual, determined after all the costs (now higher than ever) and revenues (seems to have hit a ceiling) of development, then should we start to see site acquisition prices decline to the point where projects begin to be viable again?"
Unfortunately I think it's the other way around. High land values are what provides the incentive to redevelop. When land values are down, nothing happens. (Conversely, if we figured out some way to radically improve construction productivity, bringing down costs, this would result in higher land prices and much more redevelopment.) https://morehousing.substack.com/p/land-sales-down
Thanks for the pointer to Michael Geller's post. He makes sensible points, but I don't know how you would convince lenders to forgo the presales requirement.
Silly people who entered into presales but have no ability to close at the outset really earned their misfortune.
Counting on prices rising *within the next two years* definitely seems like taking a big risk.