May 2010 | Market Analysis

May 2010 | Salt Spring Island

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Market Analysis | May 2010

So…unexpectedly, in March/April, of this year, in the primary residence (city) real estate markets, the upper end properties began to get “action”/a strong sales pattern.

Yes, the buyers made offers, and if the seller was seriously for sale they accepted same, but the point is: “activity” occurred in the upper tier residential options. This strength to the luxury property segment was the first glimmer of hope for this property category, and the sales were the first markers of action, since early Spring 2008.

This augurs well, then, for secondary home/discretionary markets.

Over the past 10 years a number of things conspired, on the Gulf Islands, that ended by creating an enclave area, with a mainly non-local buyer profile.

The outcome of the Islands Trust cap on growth/preservation of “the park” (put in place in 1974) is that the limited inventory available for development was basically “done”. Thus, particularly on Salt Spring and on the Southern Gulf Islands, we’ve arrived at the “wall of no more” (my name for it!).

At the same time as this inevitable outcome of the Trust’s “no growth” policy, we had the emergence of the internet as the chief method of information exchange.

This erased time and geography, and thus created Marshall McLuhan’s projection, back in the 70s, that our technology would change us, as people (“the medium is the message“), and that it would create a “global village”.

Suddenly, via an internet search, the world discovered the very underacknowledged Pacific Northwest Coast, and that included the very alluring Gulf Islands, with their “protected investment” aspect, as a result of the Trust’s cap on growth.

The third thing that happened, right then, was the very low Canadian Dollar, which made us an attractive investment purchase choice,

The ability to work from anywhere, as a result of the internet based business revolution, allowed for a year round buyer, and there was also an influx of seasonal buyers, from around the world.

Add a great climate, a scenically beautiful area, the best protected boating waters in the world (according to mariners), a stable government, and, as they say, the rest is history.

These elements were all in play, then, between 1999 and 2007, and for Salt Spring Island and the other Southern Gulf Islands, a mainly non-local buyer profile appeared.

The ability to work from anywhere, as a result of the internet based business revolution, allowed for a year round buyer, and there was also an influx of seasonal buyers, from around the world.

Simple economics reminds us that limited inventory plus high buyer demand equals price escalation. It is the Trust’s cap on growth that has created this. Between 2002 and 2006, prices doubled on Salt Spring Island and on the Southern Gulf Islands. Post-Fall 2008, and the economic meltdowns, we have seen a reduction in prices of around 20 to 25 percent. A moment in time, then, for a buyer to consider acting!

In 2009, rural areas did not experience the buoyancy seen in the entry level properties in the city/primary residence markets. If sales did take place in the secondary home/discretionary areas, they were in the entry level residential category, but they were not consistent. Undeveloped land, commercial, and upper tier residential options remained very quiet/little activity. Suddenly, and quite unexpectedly, there is action in the higher end residential, and this seems to be creeping into the rural areas, too, not just surfacing in the city markets.

Is this a reaction to the concern over the validity of cash? Are those who have been in cash heavy positions over the past two years worrying about all the paper monies being printed for continuing bailouts, with little backing same, and a resulting fear of hyperinflation, not deflation? These are big issues! Where is that crystal ball, anyway?

What does seem to be the case right now, though, is that the “middle priced” residential options are quiet.

No definite trend, then, just moments in favour of the entry level, then a quietening there, with an emerging busyness in high end residential, with only whispers of this in the discretionary areas, and continuing quietness in undeveloped land, and in commercial.

Hmmm…flux is the name of the game, in these still early years of the 21st Century, then, and the housing market is still in disarray.

If a buyer can be encouraged to act, a seller needs to listen. There is still no consistent pattern, and this is particularly so in all secondary home regions, including on the Gulf Islands.

It may take until July/August, then, for sales statistcs to point to a trend for 2010, in our kind of market area.

All that can be noted, right now, is that the action remains in the residential segment, and it does appear to be strengthening across the board, price-wise.

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