Market Analysis

Current Market Conditions

April, 2008.

When I arrived on Salt Spring, in 1989, there were nine real estate offices and 89
realtors, with more starting each year, as we climbed towards a "mini-high" in the real
estate market, that peaked in 1993.   

From late 1994 to late 1999, there was a "downturn", locally, and at the end of that slide
(values dropped by about 30% from their rise of 60%), there were three real estate
companies left, and around 30 realtors. Many part-timers had quit the business, and
smaller companies had collapsed into some of the larger ones, or simply closed. At that
time, though, the Real Estate Act of B.C. would not allow realtors to hold other jobs; one
was a realtor, and could not work at other businesses, at the same time.     

About two years ago, the Act changed (now called the Real Estate Services Act of B.C.),
and one of the changes meant that one could work at another job/career, while being a
realtor. (I don't know that I'm in favour of this, as I think it takes away from the
professionalism that should be a part of this career, and it also allows a "part time"
aspect to the job -- since real estate is about current information, it's not always
possible for a part time realtor to be "in the loop" of market shifts/trends, as their
attention is not going to be whole-hearted).    

At this moment, there are seven real estate offices on Island and over 60 realtors. There
are many part-timers, and many "new realtors", and the main business is still done by 8 to
10 real estate agents. There is a real estate truism out there that says 80% of the
business is done by 20% of the people, and that's probably still the case!
    
I work at RE/MAX as it is the only local office which truly does have an international
presence. RE/MAX International is the parent company, and it has offices throughout the
world, and attracts a top selling group of realtors, in every region. Locally, this offers
that arrow to the international buyer, that is so important to our secondary home
marketplace.

From late 2000 to 2006, we saw a 60% increase in pricing, on SSI, and another big upsurge
in real estate investment. At the moment, things remain stable, but if we start to go into
a market cycle downturn, we may see another 30% drop in values, from the current high.
This has occurred in the U.S., and may be occurring right now, in both Alberta & in
Ontario markets. Salt Spring Island is a secondary home marketplace, with a mainly non-
local buyer profile (often from out of province/out of country), and so this local market
is affected by outcomes in the home areas of this buyer profile.     

Nevertheless, with all of the worry over the stock market volatility, the health of
banks/financial institutions, the validity of cash (whose cash? how much is being printed?
what's backing same? what about inflation?), there may be a mini-surge in hard asset
investment, particularly by that second or third home buyer, who may be looking to
preserve capital.     

Salt Spring offers a protected investment area because of the Islands Trust (strict growth
controls through very severe zoning restrictions). The Trust is a government mandated body
("to preserve & protect, for the benefit of all B.C." is the Trust's mandate).   

This might be why there is a flurry of action, right now, by buyers, in our secondary
home/discretionary marketplace. Purchases may not be about appreciation, in the short
term, but simply about preservation of capital.

Your thoughts? Always welcome!