February 3, 2009.
The negative economic news continues. The housing market continues to flatten in the U.S., and the oversupply of inventory keeps prices from stabilizing. These statistics hold in Ontario and in Alberta, too. For the past 8 or so years, the main buyer profile for Salt Spring Island and the Southern Gulf Islands came from Alberta or Ontario, if a Canadian buyer, or from the U.S.
Although real estate is regional, and some areas are less affected than others, it's nevertheless a buyer's market in all areas, globally. This is good and bad news, depending upon where one sits on the fence.
If a seller, then it's not an appealing proposition to have to sell in a downmarket. One is forced to pay attention to a buyer's thoughts on values.
In a secondary home marketplace, such as on Salt Spring and on the Southern Gulf Islands, it's always (in a sense) a buyer's market. No one "has to" come here. It's all by choice. The buyer is always, then, in control of both the "where" and the "when" of all sales transactions.
Time lags are always a part of all transactions, even in a buoyant market period, as the buyer has to visit more than once, to be able to "choose for" a particular Island, and then the buyer begins to be serious about a property on that chosen island destination. Since no one is "local", times between visits can be extensive, and it usually takes one to three years to sell any property, on any Gulf Island, because of this choosing process. It's not about property type or price, then, but simply about whether the choice should be for Galiano or for Salt Spring or for Pender...or even for an equivalent Vancouver Island location! This searching for "the" place all takes time. At least two visits, and often three, are required for that non-local & mainly out of province/out of country buyer to make a decision "for".
The extra wrinkle, right now, for a seller, in such a secondary home/discretionary marketplace, is that the buyer is now in control of the price point paid in any transaction. With so few sales in place, as a buyer can choose to "wait and see" for a second or third home purchase, it's difficult for both sellers and appraisers to come to grips with an actual "market price". It's all a bit subjective. This might be the reason why so many price reductions, in this kind of discretionary marketplace, take place at the point of sale. It's buyers that set markets, not sellers or realtors. If a buyer makes an offer, and the seller has to sell, then that accepted price creates the market. We need more sales, locally, to "set" that figure/trend.
If one is on the buyer side of the fence, though, it's a very good time to consider a purchase on a Gulf Island. The Islands Trust, back in the mid-70s, created a "preserve and protect" mandate, for the benefit of all B.C. residents. The Islands are "preserve areas", then, where growth is prohibited/strictly controlled by severe zoning/density bylaw restrictions. This means, then, that overall there will always be a low inventory of properties for sale, on any Gulf Island, regardless of market trend in play at any given time. There is a cap on growth. This creates a "protected investment" area, in a real estate ownershiip sense.
This wasn't, of course, the purpose of the Trust. It was created to protect and preserve the environmental quality of this area. It's simple economics, though, that low supply coupled with high demand will always create a higher price point for the item. Real estate is cyclical, and prices do go up and down. It's interesting, though, that when they "fall" they rarely return to pre-rise price points. If things went up 60% in value, over a five year period, and then they fall 30%, they're still much higher than prices before the run-up. If one looks at the past in real estate cycles, one can see this kind of run forward/fall back/not to earlier prices/creep up/run forward, etc. etc. It's just the rhythm of a market driven item.
Real estate isn't liquid, and it can be difficult to sell it in a downmarket cycle. Over time, though, real estate in such "controlled growth" areas, can only go up in value. The internet erased time and geography, and so opened this area up to a global buyer profile. The mild climate (a microclimate known as "cool Mediterranean"), the proximity to major centres with ease of access to same, yet with a wonderful sense of rural "apartness", and all services/amenities at hand...it's a very alluring place to call home, even if one's lifestyle means that initially one can only "be here" for summers/holidays.
With so much paper currency being printed, globally, for all these bailouts, I wonder why a person with some discretionary income doesn't begin to worry about the validity of cash. With nothing backing all this paper except a government, it might be a good idea to consider a valuable hard asset investment, simply to preserve capital. Inventory remains low, fear makes most people look in the rear view mirror, instead of down the highway, and so many people aren't paying attention to the low Can. dollar against the U.S. dollar and the euro, and to the low interest rates available, right now, and to the protective nature of a purchase of a Gulf Island property. The Trust was created to preserve an environmentally beautiful area, but the outcome of their bylaws was to create an enclave area of beauty.
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Sea to Sky Premier Properties