Market Analysis

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

October 2012, Salt Spring Market Analysis

October 2012, Salt Spring Market Analysis

Here we are…half way through our Fall Market. The Fall Market encompasses late August to late November, in our region.

Traditionally, around 60% of transactions used to take place between late August and late November.

During the past 3 to 4 years, however, nothing has been “traditional”.

The economic meltdowns of late 2008 unleashed a real estate collapse in the U.S. which, within a year, had afflicted all regions, globally.

Secondary home/discretionary regions were the most sorely afflicted…no one has to buy a second or third home, or retire in any particular timeframe, or buy a recreational/retreat property…it’s all by choice. Globally, secondary home markets saw little to no action, between 2009 & late 2011…appraisers noted that prices reduced around 35%, in our island region, between mid-2007 & late 2011.

At the same time, the local Chamber’s gathering of tourist information noted that tourism on the island was down by around 40%, in past two years (2010 & 2011).

Tourism

Since tourism is the usual first entry pointer to the islands, it’s easy to understand that a real estate purchase is usually generated by a tourist visitor falling in love with the area and then deciding to buy a property to enjoy.

No visitor…so no follow-up real estate buy…& then no hiring of an architect or designer, no work for a contractor, an electrician, a plumber, an excavator to create a driveway/prep a site, a back hoe to prep for a septic system or a landscape plan…then there are the painters, interior designers, furnishing providers, appliance providers, flooring installers…etc. etc. etc.

What about restaurants, galleries, banks, insurance agencies, gas stations, car maintenance, schools, grocery stores, accomodation providers, clothing outlets…basically, a community’s lifestyle! All were affected, in the end, by the faltering of tourism between 2009 & 2011, and thus the corresponding lack of sales in real estate offerings.

Realtors truly do start the train of a community’s business health!

2012 has seen a resurgence in sales volume in the entry level residential category, with some few sales in upper tier priced properties also lately beginning to sell.

In spite of dramatic price reductions en route, most sales still see a further reduction at the point of the offer. The buyer, at this moment in time, is still in control of the sales process. As inventory thins, prices will solidify…even multiple offers will be possible.

Markets are not static

Markets are not static items…they flow between the extremes of a sellers and a buyers market. We may be going into year 8 of an 8 to 10 year cycle, which promises stronger sales & more stable pricing…the downturn of late 2008 to early 2012 should have erased, perhaps by this time next year. No crystal balls, so only best guesstimates in play!

Secondary home markets, unlike city/primary residence areas, are driven by buyer activity. Buyers are back this year, even if it’s mainly only been active in the entry level residential segment. Good news, indeed. Sales in upper tier residential options are beginning to emerge. To date, undeveloped land sales remain inactive. No interest in commercial options yet, either.

The media is reporting downturns in real estate sales/prices in both Victoria and in Vancouver. These are primary residence/city markets. The pattern in the Gulf Islands/on Vancouver Island is a secondary home rhythm. Nevertheless, no area or market trend is untouched by another…an outcome of the Internet is the blurring of such divisions.

Uncertainty remains, and this may continue to impede strong action in all secondary home areas…purchases there, remember, are by choice.

Worry about societal outcomes, though, can also encourage action…safe haven investing is a real thing. That may result in much stronger sales.

Beginning of October

So, we arrive at the beginning of October with mixed messages. Price reductions continue to flow in from all local realty companies, in an effort to jumpstart action. Sellers of upper tier priced properties, many needing updating, who have been listed for 3+ years, take very low offers when they are presented, & yet step-in ready, almost new homes, up to 2 million, find buyers, & often sell close to their list price. Undeveloped land remains quiet.

So…sounds like everything is on the table, & price points of what is selling continue to slowly increase. A market slowly upticking? I think so. It appears that 2013 may be the year of renewal in real estate markets.

Meantime, this still evident buyers market, plus low interest rates, do encourage a thoughtful purchaser to consider buying a Gulf Islands/Salt Spring Island property opportunity “now”.

Soft temperate micro-climate, scenic beauty, rich cultural opportunities, good schools, easy access to major centres, hospital & health services on Salt Spring…it’s a plum!

How may I help you to buy your special Salt Spring Island or Gulf Islands property?

September 2012, Market Analysis

Copyright, Li Read, 2012

September, 2012.

I often think that the Salt Spring Island & Gulf Islands real estate markets fall into thirds.

The longest time segment might be the early Spring: late January to end of April. This takes in March Break & Easter, two holiday periods that can bring property seekers, wanting to be in place for Summer enjoyment.

The next segment runs from May to mid-September. This includes Victoria Day Weekend (Canadian holiday) & Memorial Day Weekend (U.S. holiday)…both of these are seen as the beginning of the “summer season” in each country…plus July 1 & 4, and B.C. Day holiday weekend (first Monday in August), & Labour Day Weekend (early September). Tourist visiting is often the beginning of property seeking.

The timeframe from mid-October to mid-January would be the “off season”/winter period…although people come to Salt Spring over Christmas/New Year, & it can be busy with seasonal events & tourism.

There are up and down rhythms within these time segments…June, for example, is always quiet, no matter the market trend in play. If we get a lengthy continuation of summer weather into October, then it may remain busyish well past our Canadian Thanksgiving Weekend (early October).

These “thirds” are flexible, can be weather dependent, but in general our busier season would span early May to early October.

In a way, it’s seasonless…property seekers can really turn up anytime in our soft climate region.

The newly revitalized Chamber of Commerce is encouraging events in the shoulder season…for the benefit of the community’s lifestyle. Certainly, the strong artistic base to Salt Spring, the organic food growers movement, and the inspired wellness category offer lots of opportunities for visitors, and on a year-round basis. Visitors often become residents, & the renewed Chamber is promoting a year round business climate for the Island experience. Tourism is the main economic driver for all the Gulf Islands.

The economic meltdowns at the end of 2008 caused a total pause in activity in all secondary home/discretionary regions, and globally so. Prices dropped dramatically and few sales occurred. There was a flattening of activity in such regions in 2006/2007, although it took till 2008’s debacle to understand why.

It may be that we will look back in a few year’s time and decide that the bottom-bottom in the market was October 2010 to October 2011. People who acted then may yet be seen to have been very prescient.

On Salt Spring Island, and on the other Gulf Islands, on Vancouver Island, and on the Sunshine Coast, sales volume rose in entry level residential offerings, in 2012. Prices were still unstable, price reductions continued as a market feature, & buyers delivered a final reduction at the point of any offer. As inventory cleared out, though, sellers were firmer in what they would accept. Does this mean the buyers market is over?

Not quite. There has been a lack of buyer interest in undeveloped land options…even waterfronts. A continuing flat time in sales in upper tier priced residential offerings, and a reluctance to consider commercial/business/investment choices all mean that we may be in the latter stages of the buyers market pattern, but not out of it yet. The truly recreational market (cottage/cabin) has not been busy yet, either.

Sales volume in entry level residential is up in the islands, and the Fall market is just beginning. September & October may yet deliver significant sales.

To date, on Salt Spring, the bulk of sales have been below $700,000, with many of those below $500,000. The 3 bed/2 bath family home, in an affordable price range, and with rental potential, has been the item that experienced the activity uptick. This is where the recovery has to start, if it’s authentic & sustainable.

So, this Fall into Winter market moment may see the last gasp of buyer control over the market? Perhaps.

If this is year 7 of a 7 to 10 year cycle, then we should see increasing signs of price stability & even increases where inventory has thinned. Raw land & expensive properties may be where the best buys will occur as we work through Fall/Winter & into early Spring. Perhaps by this time next year we will see the rebuilding of a seller’s market?

One thing for sure: a market is not static.

Stay tuned!

August 2012, Market Analysis

Eurozone continues to implode. Or does it? Up to the brink & then words from the European Central Bank that they will do whatever it takes, to preserve the euro economic union. Does that mean printing more money? Is it a bid to inflate out of debt?

U.S. election insecurity continues. Until the votes are counted and the winner declared, we will hear & see a battle between two totally opposite mindsets…the individual vs the collective voice.

Secondary home/discretionary regions remain sporadic in sales volume…such purchases are by choice. No one “has to” buy a second home or retreat property, no matter how engaging the area might be. An ocean experience? A mountain getaway? What about a lake enclave? A desert or a forest retreat? And on which continent? That’s the interesting thing about that great & hungry search facility…it makes some place in competition with every place. We are McLuhan’s “global village”.

Nothing can be relied on that once seemed so secure. Remember the Lewis Carroll sequel to Alice in Wonderland? Titled Alice Through The Looking-Glass, it noted that one had to run very fast just to stay still…if you stopped, then everything else, trees, animals, people, objects, just whizzed by. Hmmm…is that the description of our 21st Century experience?

Certainly, change is the mantra of the moment. In change, there is discovery. And opportunity. To make it all possible, the need for an editing function has never been so necessary. Undifferentiated data is not information. Interpretation could be the gift.

Locally, we are noting a significant sales volume uptick in residential properties below 900,000, with most action below 600,000. The one million and up category is beginning to see stronger inquiries. A slow recovery appears to be underway in the secondary home/discretionary marketplace, & globally so. Prices are not yet stable, and reductions continue to take place at the point of an offer. Our main sales window in our basically seasonless marketplace is mid-July to mid-October, so this is “it”, right now.

We may be in year 7 of a 7 to 10 year cycle, which implies improvement. The economic issues from 2008’s meltdown continue to have impact…nowhere is immune in our connected universe.

Meantime, back on the Island, the pause that renews awaits your pleasure. It’s always a good time to buy if it’s your time. You’ll know when that is.

The Island offers environmental protection. It offers all 21st Century necessities. It offers a yesteryear experience of community. It offers a thoughtful pause. It offers ease of access and the comfort of familiarity. It’s not perfect, but it’s pretty close! I call that the right kind of investment.

July 2012, Salt Spring Island Real Estate Market Analysis

The short intensity of our “season” is upon us…July/August/Sept/October are the physicality moments on Island, for actual viewings.

Inquiries come in year-round, but physical presence to view happens in this short window. Often, when an offer comes in during other months, it turns out that the viewing of the property occurred during these four key months.

These months are also considered to be the best, weather-wise, in our region…definitely a correlation, then, re this timing issue.

Tourism has been the start of sales action in our Gulf Islands environment. People arrive by private boat, by ferry/car, by floatplane…they stay, meander the charms of Ganges Village & discover the environmental beauties of the Island itself…then they decide on a second home/recreational retreat or, if possible, retire & move here, to discover a new lifestyle.

No one “has to” buy on Salt Spring or on another Gulf Island…..it’s all by choice.

This discretionary quality can often mean time lags in decisions. Important for a seller to be “out there”, though, so that a buyer searching on the internet can discover their property option…even though months may go by before they turn up to view & more months may pass before a sales transaction takes place. There is no motivator to action…it’s all at the discretion of the buyer.

Sellers need to be patient & realtors need to be consistent in their marketing message. The Internet has totally changed real estate as an industry, and this is especially evident in the secondary home marketplace. The consumer is now in control, and in a secondary home/resort-based area, the consumer controls the where and the when of all sales.

That said, both the tourism discovery and the weather pattern that attracts, in this coastal region, are underway.

For the first time in almost four years, buyers are back in our area. Appraisers feel that prices dropped around 35% between mid-2007 and mid-2012. Sales volume this year, however, has gone up over last by around 40%.

The sales activity between January 1 & end of June has mainly been in the entry level residential category. Starting in mid-April, the buyer was having to come closer to a seller in offer price point…before that, a seller had to drop further, never mind the reductions en route, to meet the buyer. The difference? Thinning inventory in the entry level residential segment creates price stability.

Prices in the upper tier priced residential options are not stable. The very few sales between one million and 1.5 still show large reductions at the point of the offer.

Undeveloped land sales and commercial property sales remain “flat”.

At this beginning moment, first of July, we may see a build-up of activity in the upper tier priced properties. Between 2007 and present day, most have seen price reductions in the millions…as they slowly capture a buyer’s attention, price points drop substantially further at point of the offer. In this still sticky segment, the buyer reluctance remains a factor.

So…price stability & thinning inventory in entry level residential, lack of consistent interest in upper tier residential, with accompanying severe price reductions when a sale does take place, and no interest yet in undeveloped land or in commercial opportunities. Hmmm…sounds like a market in flux, to me.

Markets are cyclical, and we may be in year 7 of a 7 to 10 year cycle…this implies a natural uptick in activity. Thinning inventory foretells price increases. Undeveloped land sales/new construction will follow, as good residential options sell off. The upper tier options will also improve in sales as a safe haven seeking continues to grow.

So important, in a shift moment, to be looking down the highway and not in the rear view mirror. A positive change is underway in real estate investing.

We are just entering our “season”…and the larger market cycle is slowly upticking. As a seller, this is good news for the first time in four years. For a buyer, it’s an alert to act now…that proverbial buyers market does not last forever, and by this time next year may have vanished entirely.

Perhaps this is the sales volume season?

More information? Call me! How may I help you to buy or to sell your special Island property? Look forward to bringing my knowledge (of both inventory and of trends) to your benefit.

June, 2012

June, 2012.

June…a feast for the senses in our part of the beautiful Pacific Northwest Coast.

The month of roses, of lilacs, of snapdragons, of lavendar, of orchards blossoming to fruition…lush and fragrant and so inviting!

Salt Spring and the Gulf Islands are a part of this envelope of largesse. Breathe it in…enjoy those patios that offer cappuccinos & green tea lattes…kayak out to meander Ruckle Park…dream into the sunsets from Vesuvius Beach…be inspired by vista (2) vistas…ocean and islands and mountains melding into silver and light. Beauty everywhere!

Lucky to be a visitor, lucky to be able to live here. Sometimes, though, it’s about timing.

Market-wise, we are nearing the half-way moment in this year’s rhythm.

To date, the sales action has continued in the entry level priced residential category.

The price ceiling for this property segment has been rising and inventory has been thinning…both good signs that a slow uptick is underway. This appears to be a general feature in all secondary home/discretionary areas.

Good news, after the past three to four “flat” years in our kind of discretionary area. No one “has to” buy a second home or a recreational property or a retirement investment…such marketplace regions can be put on hold, during troubled economic times. That describes the lack of action in the immediate (four year!) past.

Markets move in cycles. Are we in year 7 of a 7 to 10 year cycle in real estate and hard asset investing? If so, then we are in a natural upticking pattern.

By Spring of 2013, we should thus see increasing action in the undeveloped land & upper tier priced residential & in the commercial options. By Fall 2013, it should be a seller’s market once again.

Sound impossible? Motivation to preserve capital & to seek safe havens may be the propellers to this shift.

Those sellers who were able to wait out the downturn years will benefit from this shift into more buoyant times.

It is what it is, though, and, in a sense, we are all prisoners of our time.

Choice is the name of any secondary home marketplace…no one “has to” buy a recreational property, or a retirement option, or an investment purchase…it’s all at the behest of the buyer. We can be put “on hold” until things improve.

On the other hand, there now seems to be a move towards preservation of capital…a safe haven seeking. That is a strong propeller to action.

So, at an authentic shift moment, everything is on the table…up, down, seller moving towards a buyer and buyer moving towards a seller…it’s all there, and all at once! Inventory clean-out is a part of it, too.

At this beginning moment, at the start of June, much is yet to come forward. Our real market is July/August/September…almost upon us!

Meantime, enjoy the beauty of our area…a place to restore the soul!

May 2012, Salt Spring Island Real Estate Market Analysis

Copyright, Li Read, 2012

May, 2012.

It’s Spring in more ways than one…the slow uptick in the real estate market continues. Is this the renewed market everyone has been seeking?

Beginning days of improvement are underway, after the severe three year “Fall & Winter” flat/inaction in the hard asset investment choices…now there is a re-emergence of sales volume…are we in year 7 of a 7 to 10 year cycle? Perhaps.

If so, it’s a natural progression towards stability & growth. All markets follow cycles, and the feedback from all regions is that sales volume has jumped up in the entry level priced residential property category. Prices are still volatile.

This entry level pricings segment always improves first…in our local region, we have seen a sales volume uptick of around 30%, although the majority of sales to date are below 700,000…& most sales still fall below 500,000.

Prices are not stable and there are still serious price reductions at the point of an offer, in spite of earlier reductions en route to the offer.

Action in the upper tier priced residential category remains very spotty/flat…undeveloped land options & the commercial segment remain without interest.

Nevertheless, an increase in sales volume of around 30% in the first quarter is a sign of an emerging market. And in our specific area, this renewed activity is fully there at the beginning of our traditional “season”: May to early October. Good news, then, to have seen the first quarter busy when it should be & in the price level it should be. Timing is key to all markets.

Throughout North America, strong sales & thinning inventory are the outcomes of this first quarter activity, & this is now the case in secondary home/discretionary regions, too. Something new! Yes, the strong sales action is mainly in entry level priced residential properties, but this activity is seen across the board.

By July, all media options (they are always behind a market trend, as have to rely on statistics from past months) will be reporting this shift into renewed buyer action.

Why now? Perhaps the fear that cash is eroding as a means to preserve capital is making buyers reappear? Currencies are suddenly perceived as insecure, & there’s a growing desire for a safe haven, a seeking to be self-sufficient, a fear of the stock market’s volatility?…these all might be some reasons for the return to hard asset investment choices, & a resurgence in interest in discretionary properties. Suddenly, a purchase of a unique property in an area like the Gulf Islands is perceived as a good holding.

With huge uptick in entry level sales, which brings strengthening of prices & thinning inventory, and at the time of year this traditionally happens (first quarter), we are positioned to now welcome upper tier priced property buyers, & investors in land. May, July, August, early September are the key months, traditionally, for that investor buyer to appear.

The property market in secondary home/discretionary regions slowed in 2006. Sales volume decreased & a pause was very evident by 2007. The economic collapses of 2008 afflicted all regions, globally.

Primary residence/city markets saw a soft uptick in entry level sales by 2010…the secondary home/resort based marketplaces remained sluggish. Low interest rates never seem to jumpstart action. Buyers set markets, not sellers or realtors. When a buyer is “on hold” (& no one “has to” buy a second home or retire in any particular timeframe), then nothing will happen in a discretionary marketplace.

Price reductions don’t drive action. Those sellers who had the option to do so, and did remove themselves from the market, were wise. Pressure from companies to reduce prices (without an outcome) was perhaps understandable, from the company’s point of view, but it was not reflecting the buyer voice. When a buyer says: “I don’t know…I”ll think about it”…they mean it!

Now, the buyer is back, for the first time in the past three year period. The secondary home marketplace is busying up. By late Fall, we may see action having occurred in upper tier priced residential, in undeveloped land opportunities, & in commercial/investment options. We may be approaching year 8 of a 7 to 10 year cycle, and so should see thinning inventory/price stability/some multiple offer situations for unique & irreplaceable property options. Those owners who waited it out were wise; not always possible to do that, though.

The real estate industry itself continues to shift dramatically, in our post-Internet world. Change is the wallpaper of our global village. Thales was right that we never step into the same river twice. Now, as we enter May & the beginning of our “real” (& very short!) season, the buyers are back in our kind of market-by-choice, & the uptick is here. More info? Call me!

Don’t be looking in the rear view mirror…time for that down the highway vista!

Sales volume + thinning inventory + stability of pricing = movement to a sellers market.

And your thoughts are? Always welcome!

How may I help you to buy your special Salt Spring Island or Gulf Islands or Vancouver Island property? Call me!