Market Analysis

Current Market Conditions

March, 2008.

The general malaise continues in the global financial markets. Wars continue in various
areas of the world. The infighting, leading up to the U.S. election, continues. The
weather has been formidable in many parts of North America, this past winter season --
snow blizzards, rain and windstorms, floods, a killer tornado, brush fires,
mudslides...it's been a "toughie", for many people. Spring is eagerly awaited!

What of the real estate market, in the Salt Spring Island and Southern Gulf Islands area?

Traditionally, the main sales window for the Canadian Gulf Islands, including Salt Spring
Island (the largest and the best serviced of the grouping of Islands), runs between March
Break and the Canadian Thanksgiving Holiday Weekend (early October). This year, though,
the sales activity began in early January, and this is an interesting sign.

Actually, after almost 15 to 19 months of a "flat" or "plateau" period, sales activity
began in late October/early November, of 2007. Previously, although the listing inventory
remained very "thin" (most owners preferring not to be sellers, unless they "had to"), the
buyer was not in a mood to act.

All of 2006, globally, was a "pause period", so this lack of action was not specific to
Salt Spring or the other Southern Gulf Islands. This kind of "pause" is normal in the
middle of a market cycle, and it was called "stable/inactive" by The Wall Street Journal.
Some realty companies/realtors misread this "flat time" as a "dipping moment". Prices,
though, remained stable, and the listing inventory remained very low. Early 2007 saw a
flurry of action in the low to midrange priced residential properties, in this area.
Undeveloped land and "high end" options remained without activity, at that point.

From about end of May to end of October 2007, though, we had the strident reporting of the
subprime fiasco/credit crunch, and resulting tumbling housing market, in some U.S.
locales. This created a fear, and that kind of fear breeds "hesitation". Some buyers
thought that everything was going to crash. Others thought prices might come down, in this
area, to reflect the drops in parts of the U.S. marketplace, and so they were "waiting"
for same to occur, here.

The losses with the subprime mess began to affect banks/financial institutions, and the
huge losses suffered by some of them created a different kind of fear. This fear is one
that propels action.

The volatility of the stock markets, where much can still be lost, plus the concern over
the health of banks/financial institutions, plus the worry over the validity of cash
(whose cash? how much is being printed? what's backing it? what about inflation?) is all
coming together to encourage a return to hard asset investment.

Real estate, in protected investment areas (there's that Islands Trust!), is an excellent
long term investment, for appreciation, and, short-term, is the perfect vehicle to
preserve capital.

This desire to preserve capital might be a strong motivator for sales, at this time.

Another spoke to the wheel of sales could be the continuing search for the perfect
retirement location, by the first wave of retiring "boomers". The B.C. Coast has always
been a popular retirement choice for most Canadians, as the weather truly is "the best" in
Canada! Salt Spring Island, which has been named the 16th most popular Island destination
choice, in the world, remains a strong contender for that retirement minded person.

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