Copyright, Li Read, 2008
Well, that real estate wheel just goes round and round, and sometimes it's up, and sometimes it's down.
This year has seen many "historic events", however. It is most unusual that we have seen a collapse of the housing market, a volatile spin-out of the stock markets, creating huge losses, and a meltdown of the financial institutions/banks, to the point where they need to be bailed out by governments, or they will collapse. All three sectors "down", at the same time, is the "historic event" aspect.
The government interventions, by way of huge amounts of money, to try to fend off the disasters of a collapse, mean that a lot of paper monies are being printed, globally. What's backing same? The "government"? All that paper money washing into the system may bring hyperinflation in its wake.
Ownership of good hard assets, in an inflationary spiral, would be a wise move. Real estate, in protected investment areas, with good qualities, may yet end up being the flavour of the month again, in some key locations.
Locally, the Islands Trust has made every Gulf Island just such a protected investment choice. The supply is limited due to the no growth policies of the Islands Trust, which is a government mandated body, in place since 1974, with the mission to "preserve & protect the Islands, for the benefit of all B.C. residents". Limited inventory coupled with high demand inevitably brings with it a price increase, over time. In a downtime, such as the one we're experiencing, it might also be a way to preserve capital, by purchasing a gem of an Island property.
Sellers are motivated (they've all been reading/listening to/viewing the same "bad news"), interest rates remain extremely low, and there is a good selection of options to choose from (which is never the case in a seller's market!). Confidence is the key to action, however, and when a buyer is worried, they are "inactive". That is the scenario right now.
The credit crunch is still with us, however, as the banks are still reluctant to lend. This afflicts the low to midrange priced properties, everywhere, as buyers may not be able to get a mortgage. In the higher end property options, where the buyer may be able to purchase without a mortgage, some transactions are beginning to occur. Is that the "preservation of capital" move?
In a secondary home/discretionary marketplace, though, which is the description of the Salt Spring Island and Southern Gulf Islands areas, no one "has to" purchase anything, in any particular timeframe, and so the buyer can choose to wait it out, and "see" what will occur, in the "future". Another recipe for inaction.
Sellers who really need to or want to sell, in this kind of second home market, will often be forced into the "price reduction" spiral downwards, but it doesn't necessarily result in anymore showings, or in any offers coming in. There is no "local market" on Salt Spring Island and the Southern Gulf Islands. They have evolved into second home destinations, perhaps one outcome of the internet's effect in creating globalization. The internet, in erasing time and geography, allowed buyers to discover and to enjoy these superb islands, from anywhere in the world.
With no local market, then, a price reduction just "sits there", awaiting an arrival and therefore a viewing, from a prospective buyer. When a price reduction does occur, though, we have other equivalent property owners following suit, and it appears as if the market is "bottoming".
Buyers set markets, not sellers or realtors. In a seller's market, it just means that there are a lot of buyers around, wanting to act, and that usually has the effect of cleaning out inventory. A buyer's market is the opposite -- many more sellers, and no buyers around to "nibble", so more choices.
With all the things we used to count on totally up in the air, and with no road map anywhere to offer guidance, it becomes very worrying for many people. Worry also breeds inaction. The argument for deflation seems to be as valid as that for inflation, although all that money being printed, without anything substantial to back it, seems to weight it in favour of the inflation forecasters, in my opinion.
Reducing prices doesn't speed up a sale, on the Gulf Islands. If one reduces too dramatically, without the support of any sales to acknowledge the validity of the price drops, then what about the equity the owner has in the house/property? It's just been erased! Was it truly market driven, or was it panic by the seller and/or the realtor who gave advice? Difficult times, indeed!
I did say there's no road map, right?
In being a secondary home market, the Gulf Islands, including Salt Spring Island, are affected by events in the principal residence areas of the buyers. We are less affected, then, by B.C. economic indicators.
The Gulf Islands may actually have begun to experience the downturn well before other communities in B.C., just because of this secondary home aspect to this area. When one looks back at "figures", it's clear that a slowdown began to be seen by the end of October, 2005. In this area, then, we might be about two thirds of the way along a track, with one third to go. If things improve earlier, in the home areas of our buyer profile, then they may return to purchasing in this wonderful location. We may see an improving trend, thus, before the rest of B.C.
It's definitely the 21st Century, though, and change is the watchword of every segment of our society -- business, education, technology, construction techniques, green building requirements, etc. You name it, and it's about "different".
Politically, it's also about change and shift.
The real estate industry itself is in flux, trying to match the consumers expectations.
It's definitely not biz as usual, anywhere!
In change, lies opportunity.
Change can bring stress, too, though, and it's so important to remember to take care of ourselves and our loved ones -- walk and enjoy nature, cook nourishing food, remember to talk to each other (turn off t.v.), and, at this seasonal time with its message of giving, remember to gift the charities of your choice. Those less fortunate than ourselves need to be remembered by us.
If you are interested in a property sale or purchase, on Salt Spring Island or the Southern Gulf Islands, please give me a call.
Your best interests are always my focus.
Sea to Sky Premier Properties
Ganges Village seaside office, across from the Harbour, at #4 - 105 Rainbow Road.