East End Land Sales Stay Strong

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Amid growing anxieties over the East End real estate market, sales of vacant land remain strong, and for the “smart buyers,” as Chris Chapin of Prudential Douglas Elliman in East Hampton puts it, present a great investment opportunity.

“There’s gold out there, and it’s turning into platinum,” he said.

According to Mr. Chapin, land sales are a “tale of two cities,” with the north and south sides of Montauk Highway creating two distinct markets. South of the highway land—given its rapidly decreasing inventory—is selling for prices even the veteran Mr. Chapin describes as shocking. But the dynamic north of the highway tells a different story, with a much greater inventory and sales figures that are much less robust.

“The vacant land market is one of the things bucking the trend,” Mr. Chapin said. “But right now it’s also a very good time to buy land. Land is more affordable than it was five years ago.”

Judi Desiderio of Town and Country Real Estate in Bridgehampton concurred. “Anytime a lot becomes available in a good market, there’s a feeding frenzy,” she said. “Sellers can command top dollar.” But, according to Ms. Desiderio, a long line of buyers does not exist in this current climate—which gives the advantage to buyers.

George Simpson of Hampton Bays-based Suffolk Research Service Inc. backs up Mr. Chapin’s assessment. According to a recent study by the firm, which focuses on the real estate industry on eastern Long Island, the median price of residential land sales in the five East End towns rose from $410,000 per parcel in 2006 to $486,131 in 2007, an 18.6-percent increase.

Mr. Simpson said figures for 2008 are too premature to define a trend, but he feels confident the land sales market is healthier than the housing market.

Even so, broker Diane Saatchi of the Corcoran Group in East Hampton said the slowdown in the housing market actually cuts into land sales.

“There are more homes available to buyers. They have more choices,” Mr. Saatchi said. And with a larger stock of homes on the market, fewer buyers are looking to acquire land. “A lot of buyers look at land as a plan B,” she explained, adding that when fewer homes were available and buyers were unable to find one that suited their needs, they purchased vacant land built a home instead. “That’s less likely now,” Ms. Saatchi said. “Buyers have a better chance of finding a home they want.”

Another factor cutting into land sales, according to Mr. Chapin, is “teardowns,” which present less of a logistical headache for prospective buyers.

“First of all, it’s easier to finance land with a structure already in place,” Mr. Chapin said. “But the main thing is, you’re not starting from scratch. There’s already a footprint on the land, and you don’t have to go through all the red tape of getting wells, or septic tanks, or road clearing. That’s already been done.”

Mr. Chapin also said that for those looking to invest, teardowns provide an opportunity for immediate income: “Instead of buying a piece of vacant land and just having it sit, many opt to buy a teardown and rent the house.”

On the flip side, the taxes on vacant land are much lower and provide many with a long-term investment. “A lot of people buy land for children,” Mr. Chapin said.

Mr. Simpson said there is usually a difference in the type of buyer looking for vacant land versus housing. “A lot of people in the market for land are speculators and developers,” he said.

Mr. Chapin agreed, saying that much of the remaining land on the East End is being bought up by developers for future projects. “They’re stockpiling their inventory right now and waiting for the next boom,” he said.

Both Mr. Simpson and Mr. Chapin said that the market for commercial land—though an entirely different animal from residential—is healthy as well.

“There are deals like never before,” Mr. Chapin said of the commercial land market, but added, “That window is closing. There’s a perception that there is a lot of commercial inventory, but there’s not. There is more in Southampton along County Road 39, but it’s going.”

Those brokers polled expressed confidence that the overall trend of the vacant land market on the East End will remain sound, especially as the population grows in relation to a dwindling supply

“We are quickly getting to the point of ‘no land left,'” Ms. Desiderio said. “Bottom line, investing in land, whatever you can afford, is always a good thing.”

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