Market Analysis

Salt Spring Island real estate in depth monthly analysis by Sea to Sky Properties’ broker, Li Read

Market Analysis, December 2016, Salt Spring Island

A small geographic space with a world-sized heart…that’s a good description of Salt Spring Island and the Southern Gulf Islands.

Hastings House

Hastings House

The Islands Trust, created by the Provincial Government in 1974, with a mandate “to preserve and protect” the environmental beauties of the Gulf Islands, for the benefit of all B.C. residents, has effectively controlled growth on all the Islands via strict zoning/density bylaws.

Salt Spring Fire Department

Salt Spring Fire Department

If you go up in a floatplane, en route from Ganges Village on Salt Spring to Vancouver, you will see the large swathes of green on the Gulf Islands…a mix of provincial and federal park reserves, CRD park reserves, Conservancy protected lands, owner gifted or covenanted land…an amazing natural gift to visitors and residents alike. The Gulf Islands have all been preserved from unbridled development.

Important, though, in this non-municipal form of governance, that 1974 is paying attention to 2016. The big problem in cities and towns seems to revolve around affordable housing. This is a problem on Salt Spring, too.

There is a range of age-groups and affluence on Salt Spring…a broad spectrum of people desiring to live here. There are no work-rentals, no affordable buy-in living options, and very few choices for the aging boomers to move to, when downsizing. So…few starter homes, no rental apartments, few downsizing choices. Hmmm….

Salt Springers are being asked if they would like to become incorporated in a Gulf Islands Municipality structure. The two elected Trust people (two per island) & the Trust documents would remain in place. The day to day running of the island would be via an elected Council (one of whom would act as Mayor). Keep informed!

On Salt Spring, December brings craft fairs (WinterCraft at Mahon Hall, plus Fulford and Beaver Point Craft Fairs), seasonal theatre & choral events at ArtSpring, gallery openings, studio tours, light-up in Ganges Village, Christmas on Salt Spring events, pop up markets in the park…special menus in our superb restaurants. Seasonal delights await the visitor!

What about that real estate market?

And, what about that real estate market? As we close out 2016, one can look back and see an upticking market. After an 8 year downturn in the secondary home coastal markets (Sunshine Coast, Victoria, Vancouver Island, Gulf Islands), Salt Spring finally saw a shift into a dramatic sales volume increase between mid-March and the end of July. Buyers were mainly from Vancouver.

The unexpected and sudden government 15% tax for purchases by off-shore buyers, in metro-Vancouver, at the beginning of August, created a “pause” in all the secondary home coastal marketplaces…those sellers in Vancouver’s “hot market” had been the buyers in all the “by choice” regions. On Salt Spring, we “lost” August/September/early October. Then, around mid-October, things began to become busy once again.

The bulk of sales remain to a Vancouver buyer. Slowly, we are seeing renewed interest from Ontario. We may start to see sales from U.S. buyers…our low Canadian $ against the U.S. currency makes a real estate purchase here an interesting investment.

So many unknowables in the world: currency instability? Inflation/deflation? Equities or hard asset investment? Shifts in government? The impact of the post-Internet world just rolling on….

Change is the mantra of our immediate time.

Part of that: Boomers and Millennials. Different strokes for different folks. Important to understand the remarkably different ideas between these two significant demographics.

Stay tuned as well for the continuing changes to the real estate industry. Post-Internet dynamics change established models.

Salt Spring Island and the Gulf Islands are “by choice”/discretionary regions. The buyer has to first choose the specific Island…and then decide for the actual property on that particular Island. Time is a component of sales in all such secondary home/recreational areas…regardless of market trend in play.

Although it’s recent that sales volume increased (mid-March after 8 years of “flat”), prices have not yet increased. Stabilized, yes…and some properties have been selling for list price. Inventory is “thin”.

The 2017 real estate market kicks in here by mid-February. That’s just around the corner. At this time of year, some transactions will complete in January…perhaps for tax reasons. The process will have begun in this calendar year, though.

So…as we close 2016: strongest sales rhythm since 2006…very low inventory…price stability & sales at list price…all auguring for further improvement in the secondary home markets in 2017. The temperate climate and that slightly “apart” security of the Gulf Islands is also of appeal.

Market Analysis, November 2016, Salt Spring Island

Here we are, segueing into the last two months of 2016.

Although not as buoyant as in “the season” (May to October), the months of November and December still offer both important visitor experiences (tourism) and significant real estate sales.

For the first time in several years, Salt Spring appears to have returned to its former “seasonless” nature.

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People do visit throughout the year. The Gulf Islands are located in a micro-climate that is very temperate. Salt Spring offers a year round pleasing visitor experience and real estate transactions occur throughout the year.

For most of 2016 the buyer for Salt Spring properties came from Vancouver. These buyers had sold in Vancouver’s hot market. They were interested in buying down (in size & in price), putting money in the bank, and exploring a new location lifestyle.

This buyer profile plans to be a year round resident…which augurs well for year round community endeavours (such as the “shop local” movement). It is different from buyers in previous years (with Alberta & the U.S. delivering most purchasers), who may have been more seasonal.

The 15% tax for offshore buyers in Vancouver, law in early August, did immediately cool Vancouver’s marketplace. The impact on all coastal secondary home markets, including on Salt Spring, was also immediate. Vancouver’s sellers had been the buyers in all our coastal secondary home marketplaces.

A post-tax pause in activity took place here, on Salt Spring, in August & September. By mid-October, sales once again began to take place, although not with the same fervour seen in that mid-March to end of July period.

That said, inventory is low in all property categories. Prices have remained stable. Sales are often now occurring at list price. The bulk of sales still remain in step-in ready residential options.

Although essentially seasonless, it is busier between early May and mid-October, with tourism. I do think there is a connection, in secondary home/recreational regions, between a successful visitor experience and a real estate sale. Oddly, though, someone who views in July might wait till November to offer.

Secondary home/discretionary areas have their own rhythm, and it’s completely different from the patterns of a primary residence/city environment.

One chooses “for” a secondary home location…no one “has to” purchase on Salt Spring or on another Gulf Island. It often takes two & sometimes three visits for a buyer to decide on the location of a recreational purchase. Patience is always a requirement in real estate sales, regardless of market trend in play, in all discretionary regions.

At the end of October, the sales stats on Salt Spring were:

  • 28 sales up to 200,000
  • 32 sales between 200,000 & 300,000
  • 50 sales between 300 & 400,000
  • 56 sales between 400 & 500,000
  • 50 sales between 500 & 600,000
  • 31 sales between 600 & 700,000
  • 14 sales between 700 & 800,000
  • 13 sales between 800 & 900,000
  • 8 sales between 900,000 & one million
  • 20 sales between one and two million
  • 4 sales between two and three million
  • 2 sales between three and four million
  • 1 sale at four million even

(Most sales between one & four million were waterfronts).

The good news for Salt Spring: a return to busy days in tourism, with accommodations providers, restaurants, car & scooter rentals, kayak and whale-watching providers, retail shops, all saying it was their best season ever. That kind of buoyancy does have an impact on a real estate market.

Lots of events happening on Salt Spring in November and December: craft fairs, studio tours remain open, special events at ArtSpring, evening classes (always wanted to learn Japanese?), Salt Spring Folk Club monthly showcases, special harvest and celebratory menus at our great restaurants, WinterCraft at Mahon Hall, special Christmas/New Year events, and always the beauty of the Island, welcoming us all to simply enjoy.

It’s true that all world economies are a part of the globalization movement unleashed by the Internet shift in communication. The Internet changes concepts of boundaries. Initially, it may have appeared that “large population venues” were most important.

It’s also possible, though, that we are now seeing a move to localization, at the same time as continuing globalization. This may be the arrow all smaller communities have been seeking. Ganges Village on the same level as Toronto? Or New York? Or Beijing? Hmmm…. The personal and local becomes the global? Content really is king?

Many entrepreneurs are gathering on Salt Spring…ideas created here, coupled with a digital platform for presentation everywhere…that sounds like opportunity. And your thoughts are? Always welcome!

Market Analysis, October 2016, Salt Spring Island

A Market Surge & A Different Buyer

Markets, markets…never at equilibrium…driven by unforeseen events. The Black Swan image.

After an 8 year downturn in our secondary home market coastal region, a resurgence in sales volume finally took place in entry level residential options, between early March and late July.

Salt Spring Island

Salt Spring Island

The buyers, however, were not the traditional purchasers for Gulf Islands properties.

For some substantial time, Alberta and the U.S. had been the main buyers on Salt Spring and the Gulf Islands. In the heart of some of the best protected boating waters in the world, and with a temperate climate, these Islands did appeal to boaters.

The driver of the activity between March and July was very different…almost all sales were to people from Vancouver who had sold to offshore buyers and were thus seeking new places & new lifestyles.

In late June, & into July, a very few upper tier priced residential properties began to sell…some had been listed an appreciable time & had reduced in price point over that time.

A buyer’s market simply means lots of inventory and no buyers. A seller’s market means lots of buyers and little inventory. Again, most of these new higher end residential purchasers were from Vancouver.

Affordable housing, whether rental or purchase opportunities, is a serious issue everywhere. Vancouver’s affordability lack is not just a Vancouver issue. This is also a problem on Salt Spring Island.

The 15% purchase tax in Metro Vancouver, for offshore buyers, may have been brought in by the provincial government to address affordability concerns/criticisms, but there were unexpected consequences to the immediate faltering of Vancouver’s “hot market”.

Salt Spring, A Recipient Marketplace & the Vancouver Tax

Salt Spring, like all secondary home/recreational regions, is a recipient marketplace. Buyers often start as visitors…they fall in love with the Island, call a realtor, and then everyone else gets busy (trades, restaurants, shops, etc).

If real estate purchases falter, then the community as a whole suffers attrition. Shop Local is a serious community item.

The Vancouver buyers planned to live in the areas they were choosing for relocation…including on Salt Spring.

In creating a tax, from outside a market pattern, with little warning, the government created trickle down outcomes for all recipient / by choice markets…it resulted in a pause in activity.

On Salt Spring, most sales had been below 750,000, with latterly a smattering between one & four million. The Vancouver buyers wanted step-in ready residential, were mainly buying down and putting money in the bank…they were seeking new lifestyles. The Vancouver tax immediately halted new activity in other regions.

Change does often momentarily stop action. It has to be digested. The Vancouver buyer profile has stopped for the moment, and that has created a pause in Salt Spring Island and Gulf Islands real estate outcomes. Will the rhythm return?

People do digest change. The unknown? The speed of digestion.

Where is Inventory going in to the Fall 2016?

What we do know, entering October: inventory remains very thin. Prices stabilized between March and July. In a few cases, post-tax and possibly reacting to the sudden pause in action, some realtors locally have reduced prices (by as much as 100,000). Is this too fast a response to the tax pause? Although the hot market in Vancouver has cooled, prices there have not come down.

As we enter October, we also know that Salt Spring has recovered its tourist/visitor experience vibe. A successful visitor encounter often leads to a real estate outcome. Will we start to see the return of our more traditional and often seasonal buyers?

A recovery in a secondary home/recreational market is never quick. A choice to purchase on a Gulf Island is not a fast decision either.

Buyers are from elsewhere, they respond to promotional marketing, they turn up, they view, they decide to buy…but not usually on the same trip. Very often, it takes two to three visits for that purchase connection to take place. A buyer also has to choose “for” Salt Spring or another Gulf Island…then they will choose a property. It’s always a two-step dance, regardless of market trend in play.

At the end of September, the sales stats are as follows:

  • 26 sales up to 200,000.
  • 32 sales between 200,000 & 300,000.
  • 49 sales between 300,000 and 400,000.
  • 51 sales between 400 and 500,000.
  • 46 sales between 500,000 & 600,000.
  • 29 sales between 600 and 700,000.
  • 12 sales between 700 and 800,000.
  • 10 sales between 800,000 and 900,000.
  • 7 sales between 900,000 & one million.
  • 17 sales between one and two million.
  • 3 sales between 2 and 3 million.
  • 2 sales between 3 and 4 million.
  • 1 sale at 4 million even.

The sales over one million were mainly waterfronts.

I do this “market thoughts” report at the beginning of a month. As things progress/change throughout that month, I update via my blog.

In change, lies opportunity. There are always good options out there for a buyer, regardless of market trend in play. I look forward to helping buyers to connect with sellers on Salt Spring Island and the Gulf Islands.

Market Analysis, September 2016, Salt Spring Island

Salt Spring Island

Salt Spring Island

Beginning of the Fall Market

So…we begin the Fall Market…here it is, the beginning of September. The calendar says summer goes on till the 20th, but most of us see Labour Day Weekend as the “end”.

Sales volume in the Spring/early Summer market has gone up markedly on Salt Spring Island, in residential properties below $750,000. Over that price point, it remains softer.

In that entry-level residential segment, though, it could be described as sellers market conditions.

What does a seller’s market mean? Limited inventory plus strong buyer demand creates a seller’s market. Price escalation occurs with lack of product.

In a Gulf Island region, there is always a limited inventory

In a Gulf Island region, there is always a limited inventory. The Islands Trust, a provincial government body created in 1974, with the mandate to “preserve and protect” the environmental beauties of the Gulf Islands, for the benefit of all B.C. residents, also effectively “capped” growth.

On Salt Spring Island

On Salt Spring Island

Growth in the Gulf Islands is controlled by strict zoning/density bylaws. On Salt Spring, commercial zoning is focused in both upper and seaside Ganges Villages, and they can’t expand beyond their boundaries. The small commercially zoned options at Vesuvius, Fulford, and Fernwood cannot expand. Home occupations are encouraged, but there are rules around these usages, too.

As soon as growth is limited, values do appreciate over time. Between 2002 and 2005, prices escalated by around 60% on Salt Spring. Then a pause developed in 2006 and 2007. Late 2008 delivered the global economic downturn, and secondary home/recreational areas (globally) saw a sharp fall-off in activity. Between early 2009 and early 2015, prices locally had reduced by around 45%.

Buyers who acted between 2013 (the “worst” year?) and late 2015, have benefitted by that dramatic levelling off of prices, in the secondary home markets. It’s difficult for people to act before clear signals of a market shift are in place…those who do act seem to have that “wolf’s sniff the wind” directional arrow.

Important always, though, to be looking down the highway and not in the rear view mirror…opportunity is ahead.

By late 2015, one could see an improving trend coming into play in the secondary home markets. The Sunshine Coast and the Okanagan saw renewed activity in the Fall of 2015. Early Spring brought action to Victoria and to some Vancouver Island communities. Mid-Spring delivered activity to the Gulf Islands. Salt Spring (perhaps because of its year-round lifestyle opportunities) usually shows market improvement first, among the Gulf Islands choices.

The interesting thing is the change in the buyer profile for Salt Spring and the Gulf Islands: almost 100% from Vancouver.

Traditionally, a Gulf Island buyer has come from Alberta (perhaps 20% of coastal buyers?) or from the U.S. (perhaps 30% of coastal purchasers?). This time, it’s buyers from Vancouver, who have sold during the extremely “hot” market there. They are seeking new areas to reside…not just recreational/seasonal buyers, thus.

These previously Vancouver based buyers will live here year round, and that has all sorts of good outcomes for the day to day business life on the Island. Shop Local becomes a viable item when there is a year round resident, and not just a seasonal impact.

Within the past 11 weeks, sales volume dramatically rose (perhaps tripled?) in the entry-level residential segment. On Salt Spring, that would be between 300,000 and 750,000. Low inventory with high buyer demand leads to price escalation. Couple that with an area with a no-growth policy (Islands Trust) and you can see that we may be returning to that 2002 to 2005 model.

Opportunity continues to exist in upper tier priced residential, in undeveloped lots and acreages, in recreational cottages/cabins, and in commercial options. These market segments have not yet seen the quick sales of the entry level priced residential properties. As these property categories start to sell (and they are slowly becoming more and more active), and inventory begins to thin out, price points will also stabilize/rise.

The sales stats to date break out as follows.

January 1 to August 28 “solds to date”:

  • 26 sales between 1 and 200,000.
  • 29 sales between 2 and 300,000.
  • 47 sales between 3 and 400,000.
  • 45 sales between 4 and 500,000.
  • 44 sales between 5 and 600,000.
  • 26 sales between 6 and 700,000.
  • 10 sales between 7 and 800,000.
  • 9 sales between 8 and 900,000
  • 5 sales. between 9 and 1 million.
  • 16 sales between 1 and 2 million.
  • 3 sales between 2 and 3 million.
  • 2 sales between 3 and 4 million.

There is always opportunity in any market trend. Creativity wins the day in a discretionary region. A buyer’s market means lots of inventory and few buyers. A seller’s market means little inventory and lots of buyers seeking.

Market Analysis, August 2016, Salt Spring Island

Summer on the great Pacific Northwest Coast is a superb season…and the micro-climate enjoyed by Salt Spring Island and the Southern Gulf Islands is delectable.

Salt Spring Island

Salt Spring Island

It’s a short season…and here we are at a mid-point. Time to get out there and enjoy all of the amazing opportunities offered in our special Islands region.

A time for Inspiration

Lakefront swimming, ocean kayaking, sailing between alluring anchorages, savouring produce from farm gate stands, being inspired by artists and crafts artisans in galleries and on studio tours, enjoying live music venues, theatre productions, and a hiking/walking experience that re-introduces one to the natural world preserved on the Gulf Islands.

The real estate market has recovered on the Gulf Islands in what I call the residential entry-level property segment. On Salt Spring, that would be 350,000 to 750,000 price range.

It does appear that the Spring market in the Gulf Islands is about sales in that entry level residential category.

Between mid-July and end of November, upper tier priced residential properties begin to find their buyers.

Some years back (and who knows why), the Gulf Islands became a late summer/fall real estate marketplace.

This market analysis is always written at the beginning of a month. For market updates, reflecting the rest of the month’s outcomes, check out my blog. Also check back to my June and July “reports”…this is a very new recovery (just 10 weeks old? After an 8 year downturn.).

So, the first half of the year saw the following breakdown of sales (January first to July 18th):

  • 19 sales up to 200,000.
  • 26 sales between 200 and 300,000
  • 40 sales between 300 and 400,000
  • 43 sales between 400 and 500,000
  • 37 sales between 500 and 600,000
  • 24 sales between 600 and 700,000
  • 9 sales between 700 and 800,000
  • 5 sales between 800 and 900,000
  • 5 sales between 900 and one million
  • 12 sales between 1 and 2 million. (most below 1.7)
  • 1 sale between 2 and 3 million
  • 1 sale between 3 and 4 million

You can see, then, that the Spring market is about the beginning stirrings of the authentic recovery. From mid-July to end of November it’s the upper tier time.

An outcome of thinning inventory is price increase…for the moment, a buyer may have to meet the benchmark set by the seller, as listings diminish. Sales volume may have tripled, and prices may have stabilized…but price increases have not yet been strongly evident. As we ease into the Fall market, we may start to see prices escalate.

Why Should you Purchase on Salt Spring>

Why consider a purchase on Salt Spring Island or a Gulf Island? One thought: the Islands Trust (created in 1974) effectively capped growth on the Gulf Islands. A limited inventory, combined with a strong buyer demand, creates a higher price point for all purchases. It’s the economic axiom that low supply plus high demand equals price escalation. A property purchase on a Gulf Island is perhaps a protected investment.

Perhaps a more important reason for a Salt Spring Island or Gulf Islands purchase: to enjoy a softer, gentler lifestyle, with an emphasis on the natural world and the impact of an artists voice.

Salt Spring and the Southern Gulf Islands are an easy commute to Vancouver, to Victoria, and to Seattle. Whether by ferry (3 different regular scheduled ferries service Salt Spring) or by floatplane (regular sked flights to downtown Vancouver, to Vancouver Airport, from Salt Spring), it’s very easy to come and to go…and yet these Island gems swim enticingly apart in the Salish Sea.

Proximity to major centres, yet serenely apart. All opportunities in the 21st Century available, yet an alluring yesteryear ambiance. A thoughtful and caring community, yet strong opinions. Definitely an interesting place to reside!

Market Analysis, July 2016, Salt Spring Island

‘Tis The Season!

July is the mid-point in our year and is also the beginning of our “real season” in real estate showings and subsequent sales. Salt Spring and the Gulf Islands, and many of the Vancouver Island communities, are secondary home markets. They are busiest between July and October.

salt

Secondary home/recreational areas do not follow the sales rhythms of primary residence/city regions. Thus, although eventually propelling activity in discretionary areas, Vancouver and Victoria real estate outcomes are quite different from those on Salt Spring or Mayne or Gabriola or in Parksville.

The huge sales volume in Vancouver, with resulting price increases, appears to now be mirrored in some parts of Victoria. That kind of sales frenzy is never the outcome on a Gulf Island or on Vancouver Island…the Islands are “by choice”/discretionary areas. By choice, I will buy on Salt Spring…by choice, I’m moving to Pender…by choice, I’m considering Qualicum…and so on.

What does this mean for a seller in these secondary home regions?

It’s become essential to have maintained one’s property.

It may be that all those popular HGTV style home shows have created a buyer who expects things to be “done”. Buyers do not want to call in a contractor…they are not looking for a fixer upper or a handyman special. If one has that kind of deferred maintenance property to sell, it may be necessary to come to market with a severely below market price tag. It’s interesting, this lack of buyer desire for a property needing “work”.

A new roof, a new deck, a septic system in good order, a well with water treatment system in place…these are now considered essentials. Interior items? Kitchens and bathrooms remain the two key components that will attract a buyer’s interest. Next would be flooring choices. Home ownership does bring with it consistent maintenance care. Renovations to update an older more dated home are often required.

Stiff Competition Remains

In our global post-Internet world, all secondary home areas are in competition with each other. It’s not just about a Salt Spring property being in competition with another Salt Spring home. A Salt Spring property is now competing for a buyer’s attention with a home on Galiano or on Thetis or in South Cowichan or in Parksville or in Courtenay/Comox…and also in Sidney or in Victoria. That means that a buyer also has to choose for the community itself, and not just a house in that location.

One thing that is of interest for any purchase on any Gulf Island: the form of governance has “capped” growth via strict zoning/density controls. The Islands Trust’s mandate (in place since 1974) is to preserve and protect the Gulf Islands. There is no opportunity then to see an explosion of growth on any Gulf Island.

On Salt Spring, as one drives about the Island, one is pretty well looking at “what is”. This retained beauty is important, but a cap on growth also leads to an escalation of prices, over time. Buyer interest coupled with low inventory of properties does lead to price stability and price rises.

The past downturn in all secondary home markets, and globally so, has eased or ended. It was a long eight year downturn. That lack of buyer interest did lead to lots of inventory and to lower prices. This is apparently now over.

Sales volume has dramatically increased on Salt Spring and inventory has returned to low levels.

The same dynamic is in play on other Gulf Islands and on Vancouver Island.

The difference from previous times? That competition factor. A house in Qualicum is competing with one on Salt Spring which is competing with a property in Sidney…the playing field between locations has broadened.

This means that one has to sell Salt Spring itself, not just the property located there. Hmmm….another reason to shop local and so to ensure the continuing allure of Salt Spring Island? Interested in how to help to do this? Connect with the Chamber of Commerce and become a supporter of the entire community.

At this mid-point moment: between $300,000 and $750,000 price range, there are very few residential options left. Spring sales volume doubled and little new inventory came onstream. Low inventory plus renewed buyer interest leads to price increases.

Now, we are seeing interest in undeveloped land…with a view to putting up a modular or packaged home…or building a cottage and then the house. This scenario might allow one to remain at budget.

Slowly, we are seeing the upper tier priced residential offerings capturing interest. Inventory is also thin in that price point. There is renewed interest in commercial options.