Copyright, Li Read, 2009
The price reduction highway is the one that Salt Spring Island and the Southern Gulf Islands are steering down.
In looking back, one can see that Salt Spring & the Southern Gulf Islands faltered from the consistent drive upwards, around the close of 2005. This, after almost three full years of price increases, very active buyers, and low inventory. Throughout 2006 and 2007, the Gulf Islands (including Salt Spring) were characterized by the Wall Street Journal's term "stable/inactive". Inventory remained low, prices remained stable, but buyers were inactive. The WSJ coined this phrase to describe the global pause in real estate sales, especially during 2006.
It is probable that the banks knew of the impending subprime fiasco/financial meltdown by 2006, and it may be that liquidity was already becoming an issue, long before 2008's visible crashes.
Salt Spring and the Southern Gulf Islands became destination venues/secondary home marketplaces a good 7 to 8 years ago. A low Canadian dollar, low interest rates, a discovery of the beauties of the Paciific Northwest Coast generally, and a perception of stability in the Canadian economy, attracted a lot of attention our way. Our main buyer profile became someone from out of province/out of country. This is perhaps why we felt the downturn a good two years before either Vancovuer or Victoria experienced it, as these cities are primary residence/local markets. The Gulf Islands are now discretionary/secondary home markets.
On the Gulf Islands, then, we are affected by events in the home areas of our buyer profile, and not by B.C. economic indicators.
For this reason, we may see an uplift, as things improve in those distant home areas, before it will be experienced in B.C.'s "local market" areas.
The collapse of the housing market, the stock markets, and the financial markets, all at the same time, was a marker, I think, of a societal shift. Yes, it was the subprime meltdown/creative lending vehicles, mixed with greed and an ebullient market, that created the beginning of the spiral. It might have been something else, though, in any case. We are now firmly in the 21st Century, and there are no rule books out there to help us. The opening years of a new century are always a continuation of the previous decades, and then some event jumpstarts the real characteristics of the new century. That's where we find ourselves today.
Cash may prove to be the next thing we can't count on. So much is being printed, with nothing backing same but a government printing press. Is this a reason to adventure back into real estate investing, especially in "protected investment" areas? Simply as a means to preserve capital, in the long run? By protected investment, I mean places such as here, where growth is controlled by the Islands Trust. Areas that are bounded by topographical features that prohibit growth would be similar. Good climate, proximity to amenities, access to major centres, an ability to be self-sufficient, a stable political situation....such attributes could be seen as "protected investment" aspects, too.
Prices have come down, in the past year, anywhere from 12 to 30%, depending on "where" one is located, and the type of real estate involved. Sometimes, sellers are uncertain where to reduce to, and that means a price reduction will take place at the point of the sale. This is a very common outcome in a secondary home/discretionary marketplace, where one doesn't ever have a lot of sales statistics to rely upon. In a sense, a Gulf Island is always a buyer's market, as no one "has to" come here -- it's all by choice, and the buyer is always in control of the "where" and the "when" of any sales transaction. The difference, this time, is that the seller knows that the buyer is also in control of the price to be paid for the property.
I realize that there is substantial deleveraging/deflation still occurring, as the outcomes of the subprime mess continue to work themselves out. With all the printing of currency, though, to meet these bailout demands, it makes me have a concern about hyperinflation coming, too.
No one can predict the speed of outcomes...again, that's a characteristic of the 21st Century, where time has been erased by the internet. An action begets an instant reaction...that binary world of immediacy is where we all are operating from.
It is a buyer's market, though, and it might also be the best time of all to be a buyer. To secure capital by a purchase of a desireable property, at a very reduced price, and with excellent mortgage rates still available...that sounds like a recipe for success. Fear does create hesitation. Creativity allows one to ponder the options, and to recognize opportunity when it's staring one in the face.
Take a minute, and think it through. First, though, it's important to only watch media coverage once a week. Statistics, used by the media, are about past moments -- usually 90 to 120 days ago. We are hearing, right now, about stats from November. By May, we'll be picking up stats of this moment in time. No one ever made a good decision by looking in the rear view mirror.
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