Market Analysis

Current Market Conditions

January 2008.

January is a time for "projections". Some current suggestions as to the future of real
estate sales, in 2008, are:

1. "Market Will Stay Strong in 2008 -- CMHC:

Existing home sales are poised to experience their best year on record with just more than
521,000 units in 2007, a 7.8% increase over 2006, says Canada Mortgage and Housing Corp's
(CMHC) fourth quarter "Housing Market Outlook, Canada Edition" report.

The high level of MLS sales will be led by activity in the Prairies, says CMHC. In 2008,
the level of MLS sales will fall by 3.9%, but will still be slightly over 500,000 units,
the second highest on record. Growth in the average MLS price will remain high at 10.1% in
2007, mainly because of continued strong price pressures in Canada's western provinces. As
most resale markets move toward more balanced conditions, CMHC says growth in the average
MLS price is forecast to slow to 4.2% in 2008.

It says housing starts will reach 227,530 units in 2007, an increase of 0.1%from the
227,395 units in 2006. However, in 2008, residential construction will decline to about
214,000 units, predicts the federal housing agency. Despite this drop, 2008 will mark the
seventh consecutive year in which housing starts exceed 200,000 units.

"Continuing high employment levels, income gains and low mortgage rates have been a boon
to Canada's housing markets. Despite this, however, housing starts are expected to
decrease in 2008," says Bob Dugan, chief economist at CMHC. "The pull back in housing
starts next year will be mainly due to the increases in house prices in recent years,
which have pushed mortgage carrying costs higher."

(CMHC report, in December 2007, as it appeared in REM (Real Estate Marketing newspaper,
delivered to all real estate agents in Canada).

2. "Boomers not scared off by U.S. downturn:

Eight out of ten (83%) Canadian baby boomers, aged 41 to 61, are not hesitant to consider
a real estate purchase despite U.S. housing market volatility, according to a new online
survey by Angus Reid Strategies on behalf of Mortgage Intelligence. Twenty-one percent of
boomers surveyed anticipate making a real estate purchase in the next three years; 63 %
are not apprehensive about Canadian real estate, but have no plans to purchase within
three years; six percent are not considering a Canadian real estate purchase because of
the U.S. housing decline; and 10 percent do not know how they feel about Canadian real
estate.

"Canadian boomers are a saavy bunch, and our survey indicates that despite the turmoil in
the U.S., they clearly understand the long-term value of real estate," says John Schipper,
president, Mortgage Intelligence. "With approximately two million boomers planning to buy
a home within the next three years, this segment will be a major driver of the Canadian
real estate market."

Results from two polls commissioned by Mortgage Intelligence:

* 24 % of younger boomers (between the ages of 41 and 54) are more likely to have plans to
purchase real estate in the next three years versus 13% of older boomers (between the ages
of 55 and 61).

* 17% of those interested in purchasing real estate are most interested in investment
properties, followed by 15% who want to downsize.

More younger boomers are looking for out-of-the-box solutions for generating additional
disposable income, including real estate investments, says Barry LaValley, founder and
president of the Retirement Lifestyle Centre and special advisor to the Scotiabank Group.
"A sub-element of the investment real estate boom is the "tear down" property market.
Boomers are seeking our inexpensive properties that can be dressed up and resold for a
profit," says LaValley."

(as reported in December 2007 issue of REM (Real Estate Marketing newspaper, delivered to
all real estate agents in Canada).

3. "Inventory the "wild card", says RE/MAX:

After posting extraordinary gains in 2007, housing market performance will moderate in
most major Canadian centres in 2008, says "The RE/MAX Housing Market Outlook, 2008"
report.

It examined residential real estate trends in 18 markets across the country. The report
found that while economic prospects will continue to improve next year, few major markets
are expected to exceed record sales levels set in 2007.



"Clearly, economic prosperity has translated into increased housing sales and upward
pressure on prices across the board," says Elton Ash, regional executive vice-president,
RE/MAX Western Canada. "The country's economic engine fired on all cylinders throughout
the year, despite dire conditions south of the border. As in 2007, inventory will be the
major wildcard next year -- the ultimate variable most expected to influence housing
market conditions and performance. A return to tight market conditions could mean all bets
are off as buyers are forced to compete, creating increased market pressure."

(as reported in December 2007 issue of REM (Real Estate Marketing newspaper, delivered to
all real estate agents in Canada).

Mmmmm..... the above three reports were done in December, of 2007, and were "projections"
of the potential future in 2008.

Real estate sales on Salt Spring Island and the Southern Gulf Islands do not follow the
trends found in major centres in Canada. The Gulf Islands are a secondary home and
discretionary market. The buyers who discover the Islands are not always going to live
here full time. In having become this second and third home destination, the "downside" of
such a buyer profile is that the Islands are affected by conditions in the home areas of
the buyer.

It's all very well to say that B.C. is experiencing growth, and that Vancouver and
Victoria (which are primary residence & city locations) are brisk in sales, but a better
question for the Islands would be: what's happening in San Francisco? In Tucson? In
Vienna? In Hong Kong? In Melbourne? In Chicago? in Fort Lauderdale? in Toronto?

In a secondary home marketplace, where the main buyer profile has been from "out of
province", it's vital to keep abreast of market conditions in that "home territory" of the
buyer. The royalty issue in Alberta may have an effect, too, on the desire of an Albertan
to purchase a second or third home on the Coast.

The remark about "inventory", though, as mentioned above, in the RE/MAX housing report for
2008, is something to consider on the Gulf Islands, too. There is a continuing "thin"
inventory. Although there are good choices, there aren't a lot of choices for a buyer.

Most owners still prefer not to be sellers, unless they "have to" (death, divorce, moving
to assisted living are the key reasons for a sale). Low inventory, coupled with continuing
low mortgage rates, can spell continuing action, on an upward trend, in real estate sales.
The Islands Trust, created in 1974, ensures that there will always be a limited inventory
on any Gulf Island (ask Li about the Trust).

The rise in the Canadian dollar, against the U.S. dollar, may have caused some faltering
of interest from an American buyer.

However, the concern over currency "health" (how much is being printed? what is backing
it?) might make some buyers continue to choose a hard asset investment, just to preserve
capital. The stability of the Canadian government, the appeal of the Canadian culture, the
economic viability of the country, are all further aspects of why the global marketplace
might consider Canada to be an enviable investment location.

Lots to consider, to ponder, and to be thoughtful about. The main thing about the 21st
Century is that there is no "road map", and there are no signposts to guide us to the
"right" decisions.

Wondering about an investment on Salt Spring Island, or another Southern Gulf Island? Give
Li a call, and see how you can benefit from this volatile market moment. It always works!

Email Li at: liread33@gmail.com "See Li for Successful Solutions!"

Waiting for your call!