February 2011 | Salt Spring Island

Markets are not static…up, down, up, down…the thing is, we don’t know the length of these ups/downs…six months? Two years? A decade?

Nevertheless, markets have beginnings/middles/ends, whether going up or down (market equilibrium doesn’t last, if it’s even possible).

When looking back, it appears that the current pause in all secondary home marketplaces, globally, including on the Gulf Islands, began in early 2006. Although sales still took place in 2006/2007, they were sparse and prices had begun to soften. By the time the global economic meltdowns occurred in Fall, 2008, the housing bubble had burst, well and truly, and “everywhere”.

In the secondary home/discretionary markets, appraisers noted that prices had reduced by 20 to 30 percent between mid- 2007 and mid-2010.

No one “has to” buy a recreational property, and one can decide to retire later than initially planned. A buyer always sets the pace for sales in all discretionary marketplaces.

While primary residence/city markets experienced “uptick” in entry-level properties, throughout 2009 and first half of 2010, this was not seen in any B.C. rural/secondary home markets.

Buyer reluctance was the name of the game, in all our B.C. discretionary areas.

Substantial price reductions, always a classic response to stagnant conditions, did not result in more viewings and seldom resulted in offers (particularly in the upper tier priced properties).

Tax assessments are arrived at by a “snapshot” of the market on July 1st, and this then becomes the government assessed value in January of following year. Based on the lengthy “flat” conditions, many properties on Salt Spring experienced reductions in assessed values…between 7 and 20 percent, apparently. It is true that on July 1, 2010, the “doldrums” were still in evidence.

By mid-October 2010, though, a rise in buyer willingness to act was noted, in all residential properties, including in luxury offerings.

Fear can both “stop” action and propel activity. This renewed push to action seems to be fueled by both a fear of currency instability and a search for a “safe haven”.

So much paper money has been created in the bailouts, globally, that cash itself is becoming valueless. Inflationary pressures are growing, and the seemingly evenly balanced argument of the past couple of years, between deflation/inflation, appears to be falling on the inflation side.

People are worried…best to seek an area a little “apart”, where one can be self-sustaining.

Salt Spring Island and the other Gulf Islands are seen as very appealing venues…temperate weather, ability to grow food locally, a community based lifestyle, services/amenities available on site or nearby, proximity to major centres but a ferry trip “apart”, privacy, cultural life available…the current issue of Sunset Magazine even names Salt Spring Island as one of the top 10 places to live, on the Pacific Coast of North America.

The Islands Trust, a B.C. provincial government body, preserves the environmental beauties of the Islands through severe zoning restrictions, which have been in place since 1974.

Whispers of activity, then, in our residential market segment, since mid-October of 2010…still quiet in undeveloped land and in commercial options, however. These two market segments usually follow the residential pattern within six months.

Historically, markets seem to follow that seven year pattern…there’s always a beginning/middle/end…if it began in early 2006, on a downward track, then we’re now in year six of a cycle…that’s a transition moment, where we still see some sellers further suppressing prices to attract interest and buyers back, making low offers. The buyer is still in charge of the process!

Inventory is “thinning” out, few new options coming on the market, consistent sales volume, with viewings activity now into the “over a million” segment…all this is concurrent with continuing low interest rates.

Hmmm…we do seem to be on the upward track, creeping out of the “flatness” of the past 3 to 4 years. Saavy investor buyers are around (always early responders to market shifts), and those seeking a “safe haven” address, and those coming with cash (many offers without a financing clause right now), looking to “preserve capital”….hmmm…2011 is already a very different landscape in the secondary home market regions, including on Salt Spring Island and the other Gulf Islands.

January, 2011.

Some thoughts, as we begin a new calendar year….

A reminder: my market thoughts are exactly that…”thoughts”.

If graphs and statistics are your thing, then the Real Estate Boards provide same.

Something to remember: in the Southern Gulf Islands, the various real estate boards (Vancouver, Victoria, and Vancouver Island are the 3 in our region) describe the entire Gulf Islands area as “grey territory”.

This means that realtors who work in the islands, under various companies, are a member of a specific Board…in a “grey territory” the Board affiliation can be chosen by the company in that “fringe” area. What does this mean?

Well, the “private client service”, for example, is Board sensitive — that means the listing alerts received by a consumer, who has agreed to receive same from a particular realtor, will only be alerts for listings in the Board area of that realtor.

If the realtor works for a company on the Victoria Board, say, then the consumer only gets “alerts” for Victoria Board listings. Vancouver Board and Vancouver Island Board listings will not show, thus. Such a service then, whether offering listings or “solds” information, is only partial information/is Board specific.

In the past, perhaps there used to be one overall repository of knowledge, but those days are gone forever, in our post-internet world.

Now, there is choice in information…no one place has a monopoly on information on listings or on “solds to date”.

As a part of this post-internet era, the mls system in Canada must now offer a broader spread of services to a consumer, after several years of discussion with the Competition Bureau in Canada (more info? Call me!).

The consumer must check several sources now, to get the “full picture”. There is no “one stop shop”. This applies to both listings information and to “solds” statistics.

Just know this, then, when a realtor is stating the “solds for the year”…they mean the “solds” on their particular Board affiliation, which is their source of that information.

So…no longer just one dedicated place for full information.

Also, no one checking on personal realtor websites…thus, information on these may not be current.

Just be aware, that’s all.

So…here we sit, at the beginning of a New Year.

There has been a sudden, though late in the season, difference in our secondary home/discretionary resort-based area, and it seems to date back to the first week in October, 2010.

An uptick in interest in residential properties, in all price ranges, appeared at that time.

Throughout 2009, and most of 2010, the sales pattern was only seen in entry level residential options.

A very few higher end properties sold, but such sales appeared to be “one offs”, isolated cases, and thus no market trend was in evidence.

Commercial and undeveloped (raw land) offerings were not of interest, either, to the still reluctant buyers.

After an increase in pricing of close to 60 percent, between 2002 and 2005, we saw a plateau period develop in 2006 and 2007.

This “flat” time was followed by the economic meltdowns of Fall, 2008. Appraisers feel that prices have now reduced by 20 to 30 percent, depending on the type of property involved, from 2007 levels.

Fear makes people “stop”, and this expressed itself in all secondary home markets and globally so. (Although real estate is regional in one sense, the market trends are now global…another outcome of the post-internet era, perhaps?).

In uncertain times, no one has to buy a second or retirement home…such discretionary purchases can be put “on hold”. This is what happened on the Gulf Islands, and in all similar secondary home venues.

When price reductions of a substantial nature were tried, in an effort to jumpstart activity, it very rarely resulted in either increased viewings or in sales. When a buyer sits back and says: “I don’t know…I’ll think about it”, they mean it. In such a downtime, it’s rare that pricing will create a desire to buy.

Fear can also propel activity, though, and the sales at the moment seem to be happening, for the most part, without a financing subject condition…is this a “get out of cash” movement, then?

Fear of currency instability, coupled with a concern that inflation will be the inevitable outcome of the massive bailouts at government levels, globally, may be pushing people out of cash heavy investment options and back into “real” hard assets. If so, it will be a desire to preserve capital that is propelling this activity.

No one has a crystal ball.

It is true, though, that no market remains static. Real estate is a market driven item. It has been “flat” and “depressed” since very early in 2006. That’s five years of sluggish conditions. One theory is that markets have seven year cycles.

Indicators seem to be pointing, even in the U.S., to an acceptance that the housing market has bottomed. That implies that a slow shifting to an uptick trend may be occurring now.

Inventory often shrinks in the off season…sellers take properties off market in poor weather months. What if they are also removing product from the market, though, in recognition of a shift back to hard asset investment?

January is a time when first indicators of a coming year’s trend slowly begin to take shape. By mid-March, that trend is usually much clearer.

It’s good to attend investment seminars, just to hear “prevailing wisdom”. Be listening, and remember to practice “peripheral vision”. Media like us to be locked into tunnel vision, focusing on data. Back up a little, catch a wider field of vision…there, on the edges, shimmering, is the creative impulse that delivers solutions. Up to us to be attentive to the unexpected!

Since early October, 2010, then, our local Gulf Islands market has been showing strength in all price ranges, in residential offerings.

I think we are getting close to the moment when a buyer will consider buying land and then building a home. As quality residential options sell off, well priced undeveloped land will suddenly appeal, and building will once again be a viable choice.

Short term, then, we have continuing low interest rates, good inventory, motivated sellers, and the Gulf Islands / Salt Spring Island remain very alluring opportunities, over time, for both enjoyment and investment.

How may I help you to achieve your special Island dream? I look forward to your call!