Li Read's Market Analysis for Salt Spring Island Real Estate & Gulf Islands Real Estate

Market Analysis

Current Market Conditions

Copyright, Li Read, 2007

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August 2007.

The real estate market on Salt Spring Island & the Southern Gulf Islands does not run on a calendar year rhythm -- it's from July to July, and not January to December.

The Spring market, in any particular year, inherits the trend of the previous Fall. If there's going to be any uptrend or downturn, then, it will start to become evident by late August/early September, and any new listings coming onstream, in the Fall, will reflect these potential shifts, either "up" or "down".

The middle period of a market cycle is often characterized by a "flat" time, with little new inventory, and therefore scanty information re a sales record or "tracking", as there will be few sales, too. The buyer, during a middle segment of a cycle, is in a "resting mode" -- still "looking", perhaps, but not in a mood to "act".

Apparently, from October 2005 to October 2006, globally, there was a "stable/inactive" time, with a "plateau" effect.

A lot of interesting articles were written, during 2006, about an impending collapse of the "hard asset" investment vehicles. This didn't happen, and, in real estate in our area, we noted an increase of sales volume, of about 60%, in the 2007 Spring market. This increase might have been there sooner, if it hadn't been for the 16 severe storms that hit the entire Coast, from Nov. to end of Jan, this past winter -- that weather pattern did cause hesitations in our local marketplace.

We might still be in the "middle period" of a market cycle.

There have been sales in low to mid range priced parcels, consistently, since February, and there were also a very few sales over the two million mark. These sales took place between February and the end of May. Although the sales completed in early Spring, the business may actually have "begun" in 2006. June is always a quiet month, regardless of market trend.

Nothing ever rushes on a Gulf Island, as the buyer isn't local, they still have to hear about the area, decide to visit, then visit other Gulf Islands, just to compare, plus visit Vancouver Island communities, and probably the Sunshine Coast, too, "just to be sure".

This all takes time, and the first visit to Salt Spring Island or another Gulf Island is almost like an "interview the Island" scenario. It's important, then, on that first visit, that the realtor sells the Island -- no matter how lovely the property, if they don't like the Island, then they won't buy that parcel. It's always a two step dance, it seems, in every sales transaction on every Gulf Island.

Time lags in all sales transactions are part of the pattern for our secondary home marketplace. The main buyer profile in this area is from "out of province", and their purchase is a second or third home.

The Islands have evolved into destination areas, people aren't moving around within the area; they're either buying or selling, moving on or moving off. Sellers have to be patient, then, and the timeframes for most sales, no matter the property type or price point, can take between one and three years to accomplish. No one "has to" buy on a Gulf Island; it's all by choice, and time is definitely a factor.

In a "seller's market", it simply means that most owners prefer not to be sellers, and that there are a larger number of buyers around than inventory. This is usually a reason why there are price increases (low supply + high demand = higher prices).

It's buyers that set a market, not sellers or realtors.

Underlying the market driven reasons for low inventory, we also have the Islands Trust's "preserve & protect" mandate with us, in this Gulf Islands area. There will always be a limited inventory available, on any Gulf Island, due to the Trust's strict zoning/density controls, then.

The current market cycle, coupled with the Trust's non-growth policies, are the two contributing factors to the price escalations that we've seen on the Islands, in the past four years. Realtors, appraisers, and tax assessment authorities are only interpreters of information; they don't "create" the market trends. Only buyers do that! When a buyer wants to consume, it creates a market. When they decide not to act, the market price points will come down. Buyers drive markets, not sellers.

How long does a middle moment last? We might be in the latter phases of same, in our area, and the end of a market cycle is often characterized, in the beginning of this phase, by "thin" inventory/continuing high demand/further elevation in price points. As the end phase of a cycle continues, though, inventory increases, prices ameliorate because of choice, and the buyer sometimes sees another investment vehicle awaiting their input.

When "hard asset" investment is the choice, it means that the stock market side of investment is not seen as the place to be. Real estate is not a liquid investment, and some people prefer the stock market side of investing. It's a teeter-totter rhythm, then, between these two markets. When real estate is "up", stock market investment is "down", and vice versa. This may be a simplified version, but it seems to be what happens!

We may just be slowly lifting out of that more "static" middle period, then, and entering our final phase of a market cycle. We may see continuing good sales, for the balance of this year, and well into 2008. We may also see more inventory opening up, which places the balance of a transaction on the side of a buyer. Segments of markets, beginnings and endings, can take a good three years to be enacted.

As potential sellers, though, it's important to be cognizant of the winds of change that can be felt, here and there, in the final segment of a market cycle. Buyers, too, who are looking for some amelioration in pricing, need to be keeping a close watch for that special opportunity.

Contact Li anytime, re any questions/comments/updates. Li is always quickly available, and welcomes your call.

Looking for the very best in real estate service? Whether a buyer or a seller, give Li a call. Your best interests are Li's emphasis. Successfully selling real estate on Salt Spring Island & the Southern Gulf Islands, since 1989, Li works for you!

Li Read,
Managing Broker,
RE/MAX Salt Spring.
1-800-731-7131
Email: islands@liread.com

July 2007

January 2007

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Contact Li Read at RE/MAX Salt Spring, 131 Lower Ganges Road, Salt Spring Island, BC, V8K 2T2, Toll-Free 1-800-731-7131