The last few years have seen a tremendous surge in demand for land, which has caused significant appreciation. The areas where we have seen the strongest appreciation have been Cliff and the outskirts of Town. Appreciation so significant that properties are literally being flipped quickly. 35 Vestal Street – sold on 5/15/13 for $1.8M; sold again on 9/23/13 for $4M – 50%+/mnth. appreciation – not bad. Old Westmoor Farm lots were selling in the $700-800K range at the end of ’10; the last one to sell sold for $1.45M at the end of ’12. 64 Cliff Road, which was three lots, sold for $3.8M total (three transactions) between August and October of this year; now it is broken into four lots and one of the lots is on the market for $2.495M (it’s a beautiful lot). Those are a few examples of many.
Following are land sales as percentage of total sales:
2009 – 6.7%
2010 – 6.8%
2011 – 13.0%
2012 – 13.0%
2013 – 15.6%
That is significant increase in demand for land. Supply did go up a little, but nothing meaningful. So, keep supply constant and increase demand means values go up.
What happened? Why did demand for land drastically outpace demand for houses on a relative basis? In ’09, when everyone was loading up on canned food thinking the world was about to implode, the smart developers remembered that real estate is cyclical and started to buy land. The trend caught on quickly with more and more developers buying land, driving up demand. They were right, when their product was ready for the market, the real estate market in general had rebounded and demand for new houses was on the rise.
I foresee this trend continuing until prices of both land and labor get too high and/or demand declines enough that there is no longer profit for the developer and they stop buying. But, I don’t think that is happening anytime soon. The supply of new houses has shrunk dramatically over the last year, and, with the equity markets on fire, demand for new houses is probably going to increase, so developers will be able to pay more for land.
My prediction, the Nantucket ’14ers will be panning for land for years to come.
