December 2014, Market Analysis

Salt Spring Island

December 2014, Market Analysis

Market Shift? Hmmm….

Is this the market moment where we trend into a real estate uptick in the secondary home marketplaces?

What was that great rock song? Sign, sign, everywhere a sign, sign….

Signals of Change

Hmmm…lots of signs that we are slowly gliding towards sellers conditions in discretionary regions, including on Salt Spring Island & on the Gulf Islands.

The slow recovery for our coastal secondary home/discretionary regions began in late 2013. It started with entry level residential options…3 bed/2 bath homes, close to services/amenities, good rental accommodations. Perhaps most buyers in these early days were investor-buyers, not end-users.

As inventory slowly thinned out, prices began to incrementally stabilize, & this busier entry level sales segment continued to strengthen throughout 2014. End-users are now outweighing investor-buyers.

Initially, on Salt Spring, sales were mainly below $450,000…now, the bulk of such family home/residential sales are below $700,000. This rise in buyer willingness to seek properties in that higher price range is a good sign. It shows that buyers are less in charge of outcomes & that the seller voice is strengthening.

As inventory thins, we begin to see undeveloped land sales & building decisions…perhaps one can still come in on budget, & get what one wants, without having to pay to renovate? I’ve always thought that the start of raw land sales points to an upward renewal of a real estate market.

Since late Summer, we have also seen more sales between 1 & 1.8 million. This is a definite signal of an improving real estate market in a by choice area. The higher end discretionary buyers had ignored secondary home/recreational regions during the economic downturns.

Yes, price reductions were significant at the point of those few upper tier priced residential sales, but even that spread between list & sale is now narrowing…another sign of an authentic improving trend.

In late September/early October, there were two higher end sales: both waterfront properties had seen severe price reductions over a several years timeline, & both sold for substantially lower than those reduced list prices. In mid-November, a small bidding war occurred on another waterfront, also listed for a substantial timeframe & also seeing reductions over time…in the end, it sold close to that final list figure, & with more than one interested party. With just a scant few weeks between these sales, is this latter one the marker of change for the higher priced opportunities? Hmmm….

Over 2 Million?

To date, except for a large lakefront equestrian centre, there have not yet been sales over 2 million. There are a number of irreplaceable estate style properties listed between 2.4 & 8.2…all private, many are large acreages, most with exquisite homes, some waterfront & some stellar oceanviews. Salt Spring & the Gulf Islands are slowly returning to their previous position of global awareness, & we may see those international buyers returning to purchase these luxury style gems.

With ease of access to major centres, & yet wonderfully “apart”, & within the best protected boating waters in the world, these stellar Gulf Islands offer a delectable lifestyle and a protected investment opportunity.

Strengthening Prices & Time Differential

So: strengthening prices, less spread between list & sale, soft “bidding wars” for unique parcels, renewed interest in undeveloped land options & willingness to consider building new, plus beginning sales in the upper tier priced residential offerings…a return to sellers market conditions? Well, it’s certainly a strong transition period right now, & with a definite upward direction.

Does the Secondary Home Market Follow Fine Art Sales Patterns?
I look to the fine art market for further guidance. Recently, at a Christie’s auction, paintings sold for hugely more than expected. My anecdotal “thought”: secondary home real estate follows fine art sales patterns within 6 months. Hmmm…. With that script, we should see sellers market conditions in play in discretionary regions by May/June of 2015.

The recovery after the economic meltdowns of late 2008 has been slow in secondary home marketplaces, including on Salt Spring & the Gulf Islands, & it has not been even-handed.

As we enter December, it’s evident that there is a significant improvement underway in tourism & in real estate sales…which augurs well for the entire business climate on the Gulf Islands. Positive change, with an upward track, does now appear to be firmly underway. We may look back, in coming months, & see that 2014 was that important transition period in the discretionary regions. Stay tuned….

November 2014, Market Analysis

Seasonal Adjustments?

Late Fall is usually the beginning of the “softer season” on Salt Spring & the Gulf Islands & on Vancouver Island. Although our Winter weather is more like a long late Fall or a prolonged early Spring, it is still considered our “off season”. This year, the so-called off season remains busy. Hmmm….

Salt Spring Island

Tourism drives real estate sales in secondary home/recreational markets, & then all other businesses experience good outcomes. The engine of those positive results is a stellar visitor experience, & the downturn in tourism between 2009 & 2012 did affect real estate outcomes in all coastal discretionary regions.

Slowly, since late summer of 2013, a slow resurgence in visitor arrivals began. Most businesses on Salt Spring, in summer/early Fall, this 2014 year, did see their “season” as the best since 2007. This local business outcome is a clear signal of an improving trend for real estate sales in all recreational areas.

Entry Level Residential Patterns

The pattern of entry level residential sales, that began in Fall 2013, has continued throughout 2014. Inventory in this property segment is thinning. Sales volume has increased substantially. List prices are slowly stabilizing, in that entry level category. The viewing price point considered by the buyer for same is also rising…from a search between 300,000 & 500,000 to one that would include properties up to 700,000. All good news for a strengthening market.

There has been a small increase, this year, in residential sales between 1 & 1.8 million. Some of these are step-in ready newer homes on large view acreages. A few are older homes on pleasing waterfront parcels, able to be enjoyed as summer places for now, & ready to develop as permanent homes later.

Although many of these options had been listed between 2 & 6 years, & had come down significantly in list prices before selling, their eventual sales do point to a renewal of interest in the higher end opportunities…a sign of an authentic recovery for a secondary home marketplace. Yes, offers are lower than sellers might have hoped for, but the fact of interest is a market dynamic that predicts change…& on an uptick momentum.

Salt Spring Island

Sign of Recovery: Undeveloped Land Sales

Another sign of a recovery: the slow increase in undeveloped land sales. When a buyer will purchase a lot or acreage, in a “by choice” region, to either “hold” or to develop, it shows a growing confidence in the overall economy…& a recognition of where the best deals might be found. Secondary home markets may have seen a 45% drop in value since 2008’s meltdowns. An investor-buyer recognizes this is a premier moment to act in such markets.

In spite of lateness in the year, the property viewings & subsequent sales continue on Salt Spring, on the Gulf Islands, & on Vancouver Island. Yes, the bulk of such sales are still in that entry level residential category, but prices of same are rising.

Our usual Pacific Northwest Coast “season” (May to October) seems to have shifted this year to an August beginning…& it is still continuing.

2014 may be recognized as the true transition year between a severe & prolonged downmarket and a serious hard asset uptick. If so, then our Spring Market (in play by March Break) in 2015 may show higher prices & less inventory.

Recently, tax assessed values were being relied upon by buyers as market value indicators. This may be another area of upcoming change. Previously, in all secondary home regions, market value was always much higher than government tax assessments. This recent timeline in favour of buyers may be slow-dancing to the seller side of the transaction equation. February 2015 should tell the tale.

Change in The Buyer Profile?

One serious change post-downturn (which may have been in place since 2006, in all secondary home/discretionary regions): the buyer profile. Pre-2008 economic meltdowns, that “boomer” demographic was a strong buyer profile on Salt Spring & the Gulf Islands, & on Vancouver Island. An aging population in this segment may lead to a reliance on “millenials”…& their property decisions may be very different from those earlier boomer desires.

Will secondary home marketplaces be as popular? Hmmm…that might be the big unknown, for all discretionary/recreational communities. Changing tastes mean changing visitor outcomes…which directly affect real estate sales in all “by choice” regions. Hmmm, indeed!

Many positive signs, then, as we ease to the final weeks of 2014. Continuing entry level sales activity, growing interest in undeveloped land, a slow renewal of sales in the million plus range, a recognition of excellent values in secondary home markets…plus a renewed safe haven seeking.

All indicators point to better days for tourism & real estate sales in all coastal discretionary areas. The recovery is not even-handed, but it is underway.

October 2014, Market Analysis

October really is the segue from mellow Fall to stark Winter.

Early October pretends it’s still September…late October says, no-no…leaves flying, November’s almost here…it’s the Pacific Northwest Coast season of grey. (I think that means our form of Winter).

This thin strip of coastal beauty does offer a northern California “off season” weather pattern…& even more so on the amazing Southern Gulf Islands.

Salt Spring enjoys a “cool Mediterranean” climate, one that encourages orchards, berry production, vineyards, olive groves…& yet…Winter is Winter in any latitude that offers four seasons.

What about real estate sales in this soft “off season”?

What about real estate sales in this soft “off season”? The odd thing is that it can be busier in late-Summer-into-Fall than in the Spring/Summer season.

This change in physical arrivals on island, to view & to make decisions about buying, shifted into a last half of the year sales moment some substantial time ago.

It’s important to be consistently listed year round, if selling, so that a buyer can discover the property & then make plans to visit, & to view. The Internet search eye never sleeps & it’s important to be displayed to it, no matter the time it takes for a buyer response. The buyer profile for Salt Spring & the Gulf Islands is not “local”. Time is a component of the discovery-&-then-action cycle.

Very probable, though, that the arrival time to view will be in late Summer/Fall. Odd, when Spring can be such a beautiful time on this great Pacific Northwest Coast, but it is what it is.

So. The sales pattern to date: a repeat of late 2013. The bulk of sales remain in entry level residential, 3 bed/2 bath family homes, close to Ganges…good rental opportunities. This seems to point to a continuing investor-buyer purchaser, & not necessarily an end-user.

At the same time, undeveloped land sales, commercial/business interests, & upper tier priced residential opportunities remain flat segments. Random one-off sales infrequently take place, in these less active categories, but no clear pattern is yet in evidence. Also, in these random sales, a large reduction still takes place at the point of any offer, even when there have been previous reductions to that point.

Where are the best deals?

It may be, from a buyer perspective, that the best deals will now occur in the higher priced residential options or in the undeveloped land choices, in a secondary home marketplace.

Very slowly, there are whispers of interest in commercial opportunities, & from offshore investors. It may be that the strict zoning controls of the Islands Trust (in place since 1974) have an attraction…unique zonings, that can’t be repeated, have a value.

As inventory clears out, in that entry level residential category, it implies price strengthening. This may be the authentic transition moment between the end of a downturn & the beginning of an uptick. Rumours of mortgage rate increases, from recent historic lows, may also be a signal of an uptick momentum in a market.

The rhythm of the uptick is not a racing forward pattern…yet. It’s still a slow chug-chug momentum, but it’s steadily going forth. This consistency, even though most sales still remain in that entry-level category, is a very positive sign.

Not everything is market related… Other considerations…

It’s important to remember to appreciate the illuminating and naturally beautiful Islands we inhabit. Slightly “apart”, and yet close to major centres…with all services/amenities close at hand…with an interesting & caring community…with the thoughtfulness that an artists community encourages…with a self-sustaining lifestyle to preserve and protect…certainly, Salt Spring Island & the Gulf Islands are alluring locations to enjoy as a visitor or to call “home”, no matter the market trend in play.

Markets are a wave pattern. The downturn may have started in secondary home markets as early as 2006, though not have been totally evident till late 2008. The uptrend may be underway, now. Waves are not static, & markets are always in a flow of shift.

There are beginnings/middles/ends to all market cycles. Recovery also has a beginning, but it’s rarely even-handed. The Pacific Northwest Coast always seems to be the “tail of the dog”…last to see change. The secondary home/discretionary/recreational regions have been slow to recover, all over the Coast. Patience on the part of sellers is still an essential.

Buoyancy in that entry level residential segment, in these “by choice” regions, is a very good sign, & is the traditional start of an authentic market recovery. We may see more sales in the upper tier residential segment between now and early January.

September 2014, Market Analysis

How’s the Salt Spring Island Real Estate Market?

Things are definitely “better”, real estate wise, in secondary home regions. They are still not “good”. Good, to me, means consistent buoyancy in sales, across the board, no matter the property type or price.

To me, a buyers market means lots of inventory and few buyers. A sellers market is the reverse: lots of buyers and very little inventory. A transition market is a cloudy one.

At this very beginning of September 2014…

At the moment, at this very beginning of September, most sales have continued in that entry-level residential category. Sales volume in same is definitely up, possibly doubled over 2013 stats, and the ceiling in price is rising…two years ago, most sales were below 400,000…this year, under 600,000. Consistent sales, then, in that entry level residential segment, with increasingly higher prices (possibly as a result of thinning inventory), are good signs. Authentic recoveries do begin in this property/price category.

I look at undeveloped land sales as the key marker of sales activity strength, in a secondary home/discretionary marketplace. It is still quiet in raw land sales.

Salt Spring Island

In a downturn, investor-buyers seek rentable entry level residential opportunities. Such buyers are not necessarily end-users of the properties they buy.

As prices soften dramatically, during a real estate downturn, occasional upper tier priced properties sell…a buyer recognizes the moment of a “good deal”. These are random encounters, though, and not a market pattern.

What’s been missing over the past 5 to 6 years?

What has been missing throughout the past five to six years of flat conditions, in secondary home markets, is what I call the middle person.

Perhaps this is why that middle priced buyer segment (on Salt Spring, this would fall between 700,000 and 1.3 million…which is a pretty wide spread, but which does encompass properties that someone would move into and so might be choosing to live here), a middle range in type and price, and that buyer profile is still missing.

Another flat segment is the purely recreational…a summer/weekender property, a cottage-style dwelling. Perhaps that’s another indicator of the missing middle person buyer. To live elsewhere and to choose a recreational second home purchase does require a level of confidence in the economy.

Undeveloped land sales remain very flat. The buyer in a recreational area right now is not seeking a holding property and is not planning a building project. There are some very well priced and beautifully presented excellent land parcels available…and in all price ranges. In a positive real estate sales environment, we would be seeing strong purchases in this property segment.

Cottage Resort

The uptick in the entry level residential category is driving real estate sales in all secondary home/retirement/recreational areas…the bulk of sales on Salt Spring Island have continued to be in this segment.

It seems that our main Gulf Islands sales window has now become a summer/fall market. People inquire throughout the year, but physicality to view has shortened to summer/early fall. Interesting. An outcome of our post-Internet world?

The main difference delivered by that global search engine eye: it gives a buyer enormous choice about the “where” of a purchase decision.

Marketing matters

Areas, including on Salt Spring, are in competition with many other global regions…not just with our immediate neighbours on other Gulf Islands or on Vancouver Island. Hmmm…. Marketing, marketing…how to catch that buyer eye?

On Salt Spring, we are undergoing a “print war”…and in a digital age. The monthly real estate supplement, printed by our weekly newspaper, had gone to seven issues a year. Realtors had complained about expense and fact that listings did not change much in the downturn years. When same realtors asked to go to four (maybe five) issues a year, the local newspaper refused. Thus, a new supplement (four issues a year), in competition with the newspaper’s version (seven issues) was created. They have different distribution venues. Thus, if in business, it’s important (locally) to be in both. The reason behind the newer publication, though, is key: less print issues because realtors perceive business as still slow. In a brisk market, a quarterly supplement would be useless.

So…as we enter into very early September, with a good three months of our sales window still before us, we look for more activity in that “middle territory”, in undeveloped land opportunities, and in upper tier priced residential choices…those are the property segments that show a market resurgence.

Right this moment, we are still firmly in a transition period, where everything is there all at the same time. Up, down, yes, no…a market in transition is not a clearly observable market.

There are many things floating about us, globally. Small wars in many places, continuing economic issues in Euro countries, worry about sluggish recoveries in key countries (read U.S.)…no one is immune from such global concerns and insecurity creates hesitation in a real estate recovery, in a secondary home marketplace. That means on Salt Spring, too. One chooses to buy on Salt Spring Island, on another Gulf Island, on Vancouver Island. No one “has to” purchase in a secondary home/discretionary area.

So…the transition market is still with us. Most sales are still in that entry level residential category.

Renewed interest in safe haven investing might bring sales in all categories, in our slightly “apart” region.

A later sales window means we still need to see the statistics for all of September/October/early November before making a definitive call on 2014’s sales pattern.

So…it is “better”…it’s not yet “good”.

Markets, whether up or down, have beginnings/middles/ends. I do think we are at the end of a six year downturn. That means transition market patterns, in the short-term.

Difficult to clearly read the tea leaves of change. It may be that those projecting buoyant conditions by early Spring 2015 will be correct. Perhaps 2014 will be looked back at as the muddled recovery year. Hmmm…. Where is that crystal ball? Let’s hold that “better” scenario for now.

August, July 2014, Market Analysis

The main real estate sales window on the Pacific Northwest Coast seems to have evolved into a Summer/Fall market.

This may be the case on Vancouver Island, on the Sunshine Coast, as well as on the Gulf Islands.

Secondary home/discretionary markets have a different pattern from primary residence/city markets. “By choice” regions have been slow to recover from this past six year downturn.

At this very beginning of July, the uptick does appear to be underway, although it’s not an even-handed recovery & most sales to date still remain in the entry-level residential category.

It’s essential for a seller (& their realtor) to showcase listings throughout the year, in order to attract that mainly non-local buyer profile…but the physicality timeline for this non-local potential buyer to visit an area/view properties will mainly occur in July/August/September/October….perhaps into early November, depending on Fall weather pattern.

Along with this later arrival time, to view property opportunities, we are also seeing more “interviewing of areas” first.

With the “boomer” retirement wave just starting, & a strong desire from many Canadians from other provinces to choose a coastal retirement location, it makes sense that they might vacation here a good year or two before actually moving to a specific location.

Thus, Salt Spring & the Gulf Islands & Vancouver Island are in competition with each other…the potential purchaser has to “buy” the specific locale, first, before seriously looking at a property to purchase. Why here? Why not there? Serious questions!

The Internet search engines do allow a global discovery/audience. All that potential choice of destination, though, can make decision-making slower…if one can go anywhere for a retirement or a recreational choice, then that very broad choice parameter might lead to hesitation in decision…one wants “to be sure”.

Hmmm….

Regardless of market trend, it can take one to three years to sell a specific property in any particular secondary home area. Time is always a component in the choice dance. Buyers set markets, not sellers or realtors. It’s only very recently that buyers are once again looking at the secondary home/recreational marketplaces.

The good news? Slowly slowly that secondary home/recreational marketplace is on the uptick, after that 6 year downturn. While mainly busy in residential sales of properties below 700,000, in the Gulf Islands/on Vancouver Island, the “real season” is just beginning…by October, sales should be occurring in all property segments.

For Salt Spring Island, the Gulf Islands, Vancouver Island? Slow but sure recovery…& eventually activity will be seen in all price points/property types.

Our market sales window has truncated down to July/August/September/October.Offers may come in later, but chances are that the viewing took place in those four intense months.

If a realtor is actively presenting a property, year-long, then a seller needs to have faith that they will deliver a buyer in the physicality timeline. The sale process is a slow one, for many reasons, in all secondary home markets.

In lieu of a monthly market update, this 2014 recovery year, I plan to let July/August take place…by mid-September, the shift should be clear, with provable statistics. Will report back in with verifiable statistics then, as opposed to reasoned projections right now. Important to let the beginning weeks of our “real market” take place. The rhythm/speed of our recovery is not yet totally clear.

Meantime, any questions, please contact me. I offer weekly driveby lists of all listed properties (not just board related options), plus weekly “solds to date” reports of all sales (not just board related options). The full information is thus always possible with me.

In September, I will report back with the total “actuality”, to that point. Meantime, it’s Summer, in the supremely beautiful Pacific Northwest Coast…enjoy!

Looking for your special piece of paradise? Your best interests are my motivation.

Whether buying or selling, please contact me for excellent service & all information. Knowledge is key.

Thank you!