November 2012, Market Analysis

Here we are, easing from Fall Market into Winter.

This has been a continuing slow year in real estate sales, but it has been busier when compared to past three years.

There has been a definite rise in sales volume in the entry level priced residential segment, but only marginal action in the upper tier priced residential category.

Very substantial price reductions continue to come in, from all companies, in all property types. These reductions do not necessarily bring increased showings or offers. They do encourage other sellers to follow suit, in order to remain competitive in pricings. At the point of an offer, the buyer often delivers a further serious price reduction, in spite of consistent price drops en route.

So, sluggish conditions & further price instability, in entry level residential options. Lack of interest in undeveloped land choices. Little interest in commercial/business opportunities. Sporadic interest in upper tier priced residential offerings, & very significant reductions at the offer point, in most cases. It remains a very uncertain market, then, with periods of inaction across the board.

It is marginally improving in that lower end priced segment, but there is no certainty that this means consistent stronger conditions on the horizon. Media reports, which share information from the recent past, are still highlighting gloom re economic statistics. In Canada, they talk about potential real estate bubbles.

So, Year 8 of an 8 to 10 year cycle now coming up?

Implying a resurgence in sales, though not in pricings? Perhaps…. Early Spring will tell the tale. It appears that the last two months of a year ease into first two months of the following year. Takes until March, then, to see any shifts.

A seller needs to be patient…in our kind of discretionary marketplace, the buyer is always in control of the where & the when of any purchase.

In this kind of uncertain economic time, price reductions don’t necessarily create a desire to act, on the part of a buyer.

No one has to buy a second home or retire in any particular timeframe or purchase a recreational or a holding property. It’s always by choice, in a secondary home market.

Confidence in the overall economy will generate buyer action in a discretionary region.

 

If price does propel action, it will be driven by such a steep price drop, so much lower than assessed or intrinsic value, that it cannot be ignored by a potentially interested buyer.

Even then, the buyer will have to be targeted towards this island, with some knowledge of the deep cuts over the past 3 to 4 years. It can take significant time from a discovery on the Internet to physicality on island, to view.

General inquiries are where a process may begin, but it can take a good two to three years for an outcome, regardless of market trend in play. Buyers do not have to hurry to a decision…there is no immediacy to action in a secondary home region.

What to do then, as a seller?

It’s important to remain visible on the digital options…targeted print, with an auxiliary Internet presence, perhaps…

…the Internet, though, is truly the driver to eventual outcomes, in our 21st Century business model. The Internet never sleeps. It has erased time & geography. If you’re for sale, you need to be visible there.

It’s all seasonless now, & when a buyer sees you, it’s all new to them. Time lags, from a seller’s perspective, are not part of the buyer’s perception. So, more patience on the part of any seller, in any discretionary area.

For several years on Salt Spring, a printed monthly real estate supplement, put out by our weekly newspaper, was the sole vehicle for advertising property listings. This all changed with the Internet search engine. This supplement has now gone from 12 issues to 7…it is always woefully out of date, as info is given to them, to print, a good two weeks before it appears. This old style print supplement is not seen until the buyer comes to the island…it does not “bring them”.

 

choice of a particular island

Marketing to the potential buyer now requires the ability to focus on & to encourage a choice of a particular island. The Internet certainly erased time & geography. It opened an area to a much wider audience. In doing so, it also opened up a broader choice…suddenly, “some place” was in competition with “every place”. Ah…more reasons for time lags. Can’t choose yet, because we haven’t seen it all yet! Too much choice creates reluctance to act? Perpetual looking is an outcome? Hmmmm….

Time…& yet not time…busy and yet not busy…rumours of improving trends in real estate at the same time as media reports from banks and government sources that further downturns are ahead…in a transition moment, all things are on the table, all at the same time. This kind of confusion often forecasts a significant shift. The question: up or down?

Not biz as usual is about all that one can say, firmly.

No matter the market trend, Salt Spring & the Gulf Islands offer spectacular lifestyle opportunities. It’s always a good time to be a buyer, if the time is right for you. It’s always a personal choice in a discretionary area.

Thoughts…sailing, technology, business…..leading edges.

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From a distance, a sailing scene is just a flash of beauty.

Close up, the toil & stress of a race, the tacking & sail work, add up to a picture of hard physical crew work.

The skipper has to keep strategy of winning in mind…testing wind & water conditions, choosing sail decisions wisely…it’s about pre-planning, significant non-race practice, & on-the-fly on site changes, in order to be able to quickly respond to the race’s shifting conditions.

It’s also about race start jockeying for position. No sailor wants to be boxed in by that middle-of-the-pack wall. To be in the front few right off the start line, with room to manouver, is the starting quest.

A sailing race motif can sum up competitive business, too. Essential to have the business plan in place…that’s the pre-planning moment. Getting the best sail package is like having the best technology tools you can put together…honing the closing arguments so one can negotiate from strength…it is about practice & presentation…is like the crew practice time.

To be among the first starters is a bit about luck, but it’s also about knowledge, expertise, & the ability to quickly embrace change…to take some risks…to recognize & respond to shifts.

We don’t get to pick the conditions of our times, but we do get to choose our responses.

In a sailing race, the wind is not in the skipper’s control, but the agility to quickly respond to changing conditions makes the difference in outcomes…in our sales careers are we stepping forth with energy & a mindset that welcomes change?

Are we taking full advantage of technology’s gift? In Q4, it may be a good time to become at ease with all our creative tools…let’s begin 2013 at the beginning of the pack, ready to go & ready to react to whatever presents.

And your thoughts are? Always welcome….

Some market thoughts, in Q4, for Salt Spring Island….

This has been a continuing slow year in real estate sales, but it has been busier when compared to past three years.

There has been a definite rise in sales volume in the entry level priced residential segment, but only marginal action in the upper tier priced residential category.

Very substantial price reductions continue to come in, from all companies, in all property types. These reductions do not necessarily bring increased showings or offers. They do encourage other sellers to follow suit, in order to remain competitive in pricings. At the point of an offer, the buyer delivers a further serious price reduction, in spite of consistent price drops en route.

So, sluggish conditions & further price instability, in entry level residential options. Lack of interest in undeveloped land choices. Little interest in commercial/business opportunities. Sporadic interest in upper tier priced residential offerings, & very significant reductions at the offer point, in most cases. Still a very uncertain market, then, with periods of inaction, across the board.

It is marginally improving in that lower end priced segment, but there is no certainty that this means stronger conditions on the horizon.

Year 8 of an 8 to 10 year cycle, coming up? Implying a resurgence in sales, though not in pricings? Perhaps….

A seller needs to be patient…in our kind of discretionary marketplace, the buyer is always in control of the where & the when of any purchase.

In this kind of uncertain economic time, price reductions don’t necessarily create a desire to act, on the part of a buyer.

No one has to buy a second home or retire in any particular timeframe or purchase a recreational or a holding property. It’s always by choice, in a secondary home market. Confidence in the overall economy will generate buyer action in a discretionary region.

If price does propel action, it will be driven by such a steep price drop, so much lower than assessed or intrinsic value, that it cannot be ignored by a potentially interested buyer.

Even then, the buyer will have to be targeted towards this island, with some knowledge of the deep cuts over the past 3 to 4 years.

Always disturbing to see a business closing….

Very disappointing news that Mark’s Wear has closed, in Ganges Village.

Although a type of franchise, it was owned & operated locally.

All franchises (Re/Max & Sotheby’s are on-island franchises, as is 1% Vancouver Island Realty, in the real estate world) are usually owned & operated locally. The banks (CIBC & BMO) are a type of franchise, as are the gas stations, the grocery stores, etc. In some people having complained, last year, when the landlord built out the space & Mark’s moved into it, on this issue of a “franchise” coming to the Island, they may have overlooked that it was local people and a local enterprise. Locally owned and operated has a meaning, under the larger umbrella of a company franchise name.

Royal Lepage‘s local office (another real estate franchise, locally owned & operated) closed its branch office in March. A result of the past four years of suppressed economic conditions globally, as well as locally. Now we have Mark’s Wear closing. This means the staff have lost their jobs, quite apart from the losses of the owners. It also means that the landlord, who built out the third phase of a three phase building plan, a good 12 or so years after the initial phases, will be out of pocket. To recoup, he may turn the large space into 3 storefronts…we will have to wait to see. Then, if he does do this, he will have to attract businesses/tenants willing to take the risk of entrepreneurship.

So…the Salt Spring Roasting Company, with its 40 employees, has left the Island…unable to find a commercial/industrial zoned parcel to expand its enterprise. Fields Store has closed. Now, another effort to create a viable business, Mark’s Wear, has closed. Very worrying.

The Chamber of Commerce has tried to renew itself in order to address business interests on Salt Spring…to support business & to encourage local support. Has the concerted & advocacy based work over the past two years had any effect?

There are new businesses on Island, this year: Dragonfly (art supplies), Thrive (local ecologically green clothing store), Pure (new pharmacy), Fever Tree (specialty clothing & design items), Salt Spring Mercantile (in Fulford). Two bookstores closed, one remains, & a new Library building is almost completed. A Grace Point art gallery (Starfish Gallery) closed its doors. However, Treasures of the Heart, a metaphysical store that has replaced the loss of Windflower Moon, has opened. What about restaurants/cafes? Galleries? Home studios? Able to wait out the economic slowdown?

So…one up/one down? Hmmm….

A strong business core is the engine of a healthy community. In a non-municipal area, without funding resources, and a faltering tourism sector, will it be possible to sustain a viable commercial core on any Gulf Island?

Important question.

And your thoughts are? Always welcome!

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!