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Copyright, Li Read, 2009 June, 2009. Mixed messages continue. I read a lot of different real estate oriented newsletters, many of them written by investment advisors, who traditionally emphasize hard asset investment vehicles to their subscribers. The Real Estate industry, through its Board affiliations and national realtor organizations, also print statistical information, and this is shared with the media. Such statistics are always 90 to 120 days "out", as they reflect a past moment. It appears that the very worst statistical evidence, for a meltdown in real estate pricings/sales volume, occurred between October 2008 and January 2009, and this was the case "globally". Yes, real estate is also a regional matter, but it does note global trends, and is not unaffected by events in other areas. On Salt Spring Island, and on the other Southern Gulf Islands, the buyer profile isn't, in the main, "local". Thus, sales activity is affected, here, by events in the home areas of such non-local, often out of province, if not out of country, purchasers. Salt Spring and the Southern Gulf Islands evolved into a secondary home/discretionary marketplace after 1998, with the advent of the internet and its ability to search the world for information. The entire Pacific Northwest Coast was "discovered", including the Gulf Islands. Many things conspired at the same time: the tech bubble, which drove funds out of the stock market and into hard asset investment; the low Canadian Dollar in comparison to other currencies, including the U.S. Dollar; discovery of the beauty and environmental preservation of this coastal area; discovery that we're located in the best protected boating waters in the world; stable government in Canada; historically low interest rates; low priced properties, with exceptional options, when compared to other areas in the world; etc. Timing is everything, remember! The timing for real estate appreciation, in our area, fell between 2000 and 2006. Sales volume rose by 60%, between 2000 and 2001, in four areas of B.C., and this was reported in the media -- Salt Spring Island was one of these locations. Between 2003 and 2005, prices rose approximately 60%, on Salt Spring Island, regardless of property type, according to appraisers. Around the end of 2005, however, there was a bit of a "pause" occurring, locally. According to the Wall Street Journal, all of 2006, globally, was described as being "stable/inactive" -- they meant by this that inventnory and price remained stable, and the buyer was reluctant to act. This also described the Salt Spring Island and Southern Gulf Islands marketplaces, as they were affected by events in the home areas of the mainly non-local buyer profile. This pause in consistent buyer activity was experienced in 2007, as well, although this wasn't the case in the primary residence areas of Vancouver and Victoria. They still have a predominantly "local market". It did show up, though, in Tofino/Uclulet, another secondary home/discretionary market area, and in retirement places on Vancouver Island, such as Qualicum Beach/Parksville, and also in Sechelt/Sunshine Coast (another secondary home marketplace) area. Whistler also experienced this "flat" time. Even the primary residence areas of Vancouver and Victoria, though, were afflicted by this lack of buyer interest, by 2008, and the Fall of 2008 was "negative territory" here, too. Now, we are hearing that the U.S. has been in recession since August, 2007. Since the buyer for much of the property in the above mentioned secondary home areas came from the U.S., over quite a lengthy period, and fueled much of the sales activity/building projects, their absence was immediately felt in the Gulf Islands, in Whistler, and in Vancouver Island/Sunshine Coast retirement communities. The credit crunch/subprime meltdown, which was fully fledged in 2008, and had affected all areas, whether primary residence or secondary home/discretionary regions, in the Paciific Northwest Coast, meant that there was very little action at all, in real estate sales. The volatility in the stock market, with huge losses, the collapse of major companies (including stalwart financial institutions), the bursting of the housing bubble in the U.S. (subprime mess/resulting credit crunch), all created the Year of Fear, for the latter 2/3s of 2008. The worst months were from mid-September, 2008, to the end of January, 2009. Fear makes people "stop". It can also propel, however, and since early February, 2009, we have had a resurgence of buyer activity, and globally so. This may be a response to so much paper monies being printed, in all countries, for these huge buyouts, in an attempt to jumpstart economies again, and to stave off a global depression. The financial institutions remain shaky, a credit crunch remains in effect, and people with discretionary income are starting to think that everything in cash might not be so wise, after all. Good and protected hard asset investment is on their radar, it seems. Nevertheless, they've listened to and read the same media reports, and the buyer today thinks they deserve "a deal". The news out of the U.S. continues to show a faltering picture. Although Canadian issues are not identical, this country is not immune to events in the U.S. The real estate industry is also changing dramatically, and this is happening at the same time as a downmarket scenario is in play. Societal shifts, definitely! Here, on Salt Spring Island and the Southern Gulf Islands, we've seen activity in the low end residential, since the first week in February. To start with, the buyer was delivering a significant price reduction, at the point of the offer, even though the seller may have had a series of significant reductions up to that point. It was also clear that the buyer wasn't in a mood to negotiate. Some real estate guru/newsletters call this a "stink bid". If the seller had been on the market, though, throughout 2007 and 2008, they were in a mood to take anything, and some of these extraordinarily low offers were successful. The interesting thing is that inventory is not huge. Death, divorce, and moving to assisted living are the chief reasons for a real estate sale. In some cases, it could be a Plan B option -- moving from a large home, as an empty nester, into a smaller residence or even a townhome option. I wondered, early in this sales process, whether we would see a narrowing of the spread between a list price and the offer bid, as time progressed, and not much new inventory came onstream. This appears to be what has occurred. Lack of choice may decrease the spreads we saw in February/March, as our "season" progresses. In Vancouver, they have experienced multiple offers, if the property was unique. It's very rare to have multiple offers on a Gulf Island, where a buyer has to "choose for" a particular Island, and it all takes time from the initial encounter, to a physical arrival, and most likely two visits before a decision is taken. Time is a component of every sale in any secondary home/discretionary marketplace, and Salt Spring and the Southern Gulf Islands are no exception! It is very typical to have a property on the market for a good two years, regardless of market trend in play, before there is a successful sales transaction. The buyer is in charge of the "where" and the "when" of a sale, in this kind of a region. Appraisers feel that prices may have come down anywhere from 8% to 25%, depending on area, type of property. Not enough sales have occurred yet for a "market" to have developed, with any solidity. The majority of sales, between February and early May, were below $650,000 (Can. $). Some very few were below $750,000. Since mid-May, we've seen six sales over one million, and only one close to 2 million (a Scott Point property, listed at 1.895 sold for 1.8). There have been no undeveloped land sales to date, and luxury homes over two million, even though exceptional waterfront land and exquisite homes, have not found their buyer. The more affluent purchaser tends to arrive in our area between early July and late September, and so we may see some growing action, in our higher end opportunities, in the next few months. Salt Spring Island and the Southern Gulf Islands are not "first time buyer" areas. They have become second and third home choices, and while people may plan to retire to their homes, at a later date, in the here and now they are seasonal residents. One can put a purchase of a secondary home "on hold", of course, and so that is another part of the "time period" that is a feature of every discretionary marketplace. Our real estate market, which was once described as "seasonless", has also evolved into a very seasonal arrival pattern. Fits and starts in March Break, Easter Holiday, both May Holiday Weekends, and then intensely from the end of June to the middle of September. Fits and starts again, from end of Sept. to end of October, weather dependent. I think I just described a resort based community! More information? Interested in the Salt Spring & Southern Gulf Islands lifestyle and wonder how to be a part of it? Give me a call! Am always quickly available, and look forward to helping you to connect to your Island paradise! With access to all listings, from all companies, I look forward to showing you any listed property that catches your interest. Thank you! This is a beautiful area, close to major centres, yet wonderfully "apart", and it is a great place to call "home". How may I help you to buy your Salt Spring Island or Southern Gulf Islands property? Li Read, Managing Broker, Sea to Sky Premier Properties (Salt Spring) Harbour view office at: # 4 - 105 Rainbow Road, Salt Spring Island, B.C., V8K 2V5 cell: 250-537-7647 liread33@gmail.com 
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