I was recently involved in a bid for a parcel of land in Oakville which we priced at $1.66 million per acre of developable vacant land.  The zoning provided for 50 units per hectare or in lay terms allowed for town houses.   The bid we calculated to reflect the value of the homes in the neighbourhood and what can be built without changes to the official plan.   The winning bid I understand to be 60% higher.  So how is that possible that two parties come up with a different valuation for a property.

How much risk is the buyer prepared to take is always a good question.  There is a direct correlation between the value of the end product and what a buyer is willing to pay for the land.  Current zoning will allow 20 town homes per acre which gives a unit land price of $130,000.   This means that homes will need to list for $650,000 plus for the buyer to make a profit. Although towns can sell for more does this neighbourhood support such a price?

If buyer is an investor or new entry into the building game they may be willing to pay more if they believe that they can sell a higher priced product or get a higher density.  They may calculate that they can get the planning department, the council and the neighbourhood to agree to an official plan  amendment for a multi story product. The factors to consider when requesting an increase in density such as traffic, noise, shadowing of existing properties and does existing services for water, sewer, roads support the proposed development.

With less green field land in the GTA, infill land is becoming more expensive.  As people are prepared to pay more for a home the value of changing the current use of a land becomes greater, however at the end of the day the math needs to work or the developer will not be able to get financing to complete the project or a reasonable profit.  Getting land for the right price for the seller and buyer is important to the success of a project.