One of the emerging developments in 2011 in Winnipeg’s local MLS® market is the significant jump in activity of vacant lot sales. In the first six months of 2011, vacant lot sales have increased 28 per cent in value over the same period in 2010.
But this dramatic jump should come as no surprise, as demand has been affected by a number of factors.
It has been widely documented in various media and industry reports, including a thorough March discussion paper on Manitoba’s rental housing shortage by WinnipegREALTORS®, which pointed out there is a residential-detached supply shortage in the resale market due to extremely low rental vacancy rates and strong immigration to our province. Both these factors are contributing sustained pressure on the resale market. As a result, you see situations where, despite new house listings coming on the market every month, all available listings are being scooped up.
An alternative is to buy a lot and build, which is what more Manitobans are now doing. But, it’s primarily a rural phenomena due to a scarcity of vacant lots within Winnipeg. Of the 268 lots that have sold in the first half of this year, only 36 or 13 per cent, were in the city.
A number of North End infill lots were sold, including one that only sold for $14,000, and a number of larger lots out in the Charleswood area south of Wilkes Avenue. Two large 130-by-1,080-foot lots sold on Charleswood Road for $165,000 each.
Many rural municipalities shared in the impressive activity so far this year. The leading MLS® area for sales during the first half of this year was the Rural Municipality (RM) of Ritchot, which includes towns such as Niverville, at 35 lots. Not far behind was the RM of Hanover south of Ritchot at 28 sales. A number of lot sales also occurred in communities such as Morris, St. Malo, St. Jean Baptiste and Zhoda.
Similar to other MLS® properties, lot prices have been rising over the last few years. Interestingly, this year’s average price of just under $60,000 is not as high as it was in the first six months of 2010, where, despite less sales activity, the average sale price was just over $65,000.
One factor keeping a lid on prices is the overall lot inventory available. There were 561 lots available for sale as of July 12, of which only 24 were within Winnipeg.
Assuming you are able to sell 43 lots every month as was the case in June, you have well over a year’s supply of lots left if no new listings came onto the market. In contrast to this overabundance of supply, 63 per cent of the accumulated residential-detached homes inventory was sold by the end of June. If no new residential-detached listings come on the market in the next few months and sales maintain the same level as in June, there would be nothing left to buy in less than two months.
As a percentage of the overall MLS® market, vacant lots represent four per cent of total sales and are the third most active property type. The most dominant property type by far is residential-detached at 74 per cent, while the condominium market share is significantly less at 12 per cent.
With projections of sustained population increases for Manitoba, based on the success of immigration through the Provincial Nominee Program, vacant lot sales will continue to play an important role in helping alleviate some of the pressure placed on the tight rental and resale markets. Of course, as with any property type, location is always front and centre, so more vacant lots need to come on the market in Winnipeg.
The city’s new Our Winnipeg Plan, approved by the Manitoba government last month, makes a strong push for infill development throughout Winnipeg. As a result, we can safely say there will be stepped up efforts to create more development opportunities for infill lots over the next few years.