"So Hara, when you buy land for building, do you build land appreciation into your calculation?
In other words, do you assume a 5% or 10% increase in the market from when you buy to sell or do you assume 0%?"
No, I don't assume any value increase. So that's 0% What I look at is the price of the land, plus build cost, plus taxes (income tax, GST), carrying costs, insurance, city fees, and a certain percentage of profit. If the value of the project increases during construction my profit margin increases accordingly. I never factor in project price increases, in fact I don't know of any builders that do. In fact any business that would do this would fail pretty quickly. That's like counting paper gains before liquidating assets. Not very smart.
Also, I build both spec homes (build to sell) and custom homes (build for customers).
"I ask because some of these builders are paying obscene prices for land and I can't see it being worth their time without the overall value increasing."
That's because your don't understand the business model, nor do you understand costing associated with construction.
Are you under the impression that builders buy property and build in hopes of making money when the prices go up? Do you really think someone is going to invest or gamble upwards of 500K to million bucks per home in hopes of the prices going up to turn a profit? That doesn't make financial sense to me.
"Also - what are your thoughts on the lack of movement for some of these N Bby homes in the $2.5+M range. Does that make you nervous building in N Bby when none of the "premium" homes are selling?"
I actually have no thoughts because I have no idea of which homes you are talking about. Doesn't make me nervous at all. North Burnaby is actually the hottest area of Burnaby right now, followed by Deer Lake, Forglen and South Slope.
Can we get back on topic!
List some sales