Land developers aim to anticipate market as holdings decline

Prospective homebuyers aren’t the only ones wondering where Red Deer’s real estate market is going. Land developers are also scratching their heads.

New homes in the community of Sunnybrook South are pictured next to empty lots.

Prospective homebuyers aren’t the only ones wondering where Red Deer’s real estate market is going. Land developers are also scratching their heads.

“We always have to think a year or so ahead,” said Guy Pelletier, vice-president and regional manager with Melcor Developments Ltd.

That’s because it takes that long to obtain, plan, subdivide and service a new neighbourhood.

“It’s not like we can decide this week and bring them on next week,” said Pelletier. “The lead time is fairly substantial.”

As a result, developers must anticipate demand many months into the future.

“You track the fundamentals and hope you track them properly,” said Gord Bontje, president of Laebon Homes.

The market is influenced by speculation, but ultimately it’s a question of supply and demand, he said.

“The simple reality is that demand is fueled by in-migration, household growth, household formations and things like that.”

Melcor’s inventory of residential lots has dropped to about 20, said Pelletier. He attributes this to builders acquiring property despite the construction slowdown.

“Last year they were still buying fairly aggressively, so our inventory was drawn down.”

Sales should be slower this year, he said, noting that many builders still have property and the real estate market — although improving — remains down. But Pelletier would still like to have more lots ready for builders.

“As a land developer, we want to be in a position to meet their needs should they be looking for more lots or a certain type of lot that maybe they don’t have in their inventory.”

Melcor expects to have another 86 residential properties in its Southbrook and Clearview North subdivisions by fall, which should sustain its builder-clients through the winter and into 2010.

Laebon’s land holdings have also declined.

“We’re selling three of four (homes) a week and moving through our inventory quite nicely,” said Bontje, pointing out that his company didn’t develop any new lots last year or so far in 2009.

But he expects to bring on more in the Lonsdale and Kingsgate subdivisions before year-end.

“We’ve got enough to hold us this fall,” said Bontje, adding that his company should also have new supplies in Timberstone Park next year.

Meanwhile, the City of Red Deer still has lots in Oriole Park and Johnstone Park. And more are expected to be ready in the Timberlands subdivision by mid-August, said Rick Elm, the city’s land co-ordinator.

That should boost the city’s total to nearly 90, with more slated to come on stream in the new Garden Heights subdivision late next year.

Elm said the city has averaged five to six sales a month since November, when a lot draw resulted in about 10 deals.

Natalie Larkam, co-owner of Larkaun Homes Ltd. and president of the Central Alberta branch of the Canadian Home Builders’ Assocation, isn’t worried about a scarcity of lots in the future. Pelletier and Bontje agree.

“I think we’re going to enter into a more normal market where there will be some supply and there will be some demand, and the two will probably balance,” said Bontje.

That’s a situation Elm would welcome.

“Before, you used to have 700 people show up for 100 lots.”

hrichards@bprda.wpengine.com

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