What affects the Salt Spring Island, BC, Real Estate?
- Canadian dollar vs United States dollar
- demographic shifts
- Salt Spring Island zoning restrictions
- overall global economy
- interest rates
- supply and demand
Lets look at each of these in depth and their effect on the Salt Spring Island Real Estate. Canadian versus U.S. dollar
When the Canadian dollar was much lower, in the sub $.70 range, (2001) it made buying property here a deal for U.S. buyers. In 2001 if a US buyer bought a place for $700,000 US, it would get them a $1,000,000 house. At the height of the market in 2005 that same property would be worth $2,000,000 CAN and it would get the customer $1,800,000 US. The US buyers made money on the run up of the property prices and the Canadian dollar. This had a huge effect on the Salt Spring Island, BC, real estate.
Local zoning restrictions
Salt Spring Island zoning has one of the biggest effects on Salt Spring real estate. There is no shortage of land on Salt Spring. Salt Spring could have it's population double to about 20,000. The zoning bylaws and Island's Trust are in place to control development not stop it. Here is a link to the land use bylaw and nowhere in the document does it say "NO DEVELOPMENT". This is a myth perpetuated by people who want you to think you are buying into a protected park.
The zoning classification of each piece of real estate makes a huge difference on its worth. Some zoning issues have hurt the market lately, such as the Vacation Rental issue. The Trust has clamped down on the illegal practice of people renting their houses out in the summer as vacation homes. I know people who bought here thinking they could do this legally and have found out it has always been against the local zoning and it has changed their financial position enough that they are leaving the island. Some people don't like the Agriculture Land Reserve (ALC) classification but there are hidden values to be found in properties with this zoning. Check the zoning of the property and what the zoning lets you do.
Demographics
Demographical shifts in Canada as explained in Boom Bust Echo by David K. Foot are making a difference on the entire Canadian west coast. Retirees, semi-retired and mobile, actively working boomers who crave a warm, temperate climate are flocking to Salt Spring and British Columbia. Our perfect, year round climate lets people enjoy themselves to the maximum and stay healthy and active. 
Global Economy
The global economy has a huge impact on Salt Spring real estate because it is an international destination. The rise in the Canadian dollar has affected some of this market. In addition, many people sell their house before they move here and if their market slows down then this market slows down. In the US the Sub prime problem has caused a domino effect and is affecting the housing market here. Interest rates
We think most people know the effect low interest rates have had on property prices so we won't go into it. Supply and demand
There is a over supply of Salt Spring listings (Salt Spring homes for sale) Seasonally adjusted there are about 400 plus listings to a population of about 10,000. If you compare that to Calgary when it was really booming(2006), it had about 1,200 listings to a population of about 1,000,000. When the market cooled in Calgary the listings shot up to 9,000.
To compare this to salt spring to really have a hot market we would need 12 listing. To have a cool market Salt Spring would have 90 listings.... but now we have 350 plus listings.
What would happen in Calgary if they had 35,000 listings? The city would be a bust at that point. This is a total Buyers Market... I do not see how anyone could call it anything but a Buyers Market. Salt Spring Real Estate market price history
Here is a look at the market history of building lots on Salt Spring;  
The graphs above show the price elasticity of the building lots on Salt Spring as the prices went up sales dropped off.
Here is a list of all the sold properties on Salt Spring that sold through the Victoria real estate board during 2009.
 Here is the list of all the Salt Spring Island properties that sold on the Vancouver real estate board during 2009.  There were approximately 182 properties sold on Salt Spring Island in 2009. Note to reader; this does not included private sales. There might have been 2-6 private sales on the island this year.
The high end is a very small portion of the sales on the island. The bulk of the sales are between 400k and 550k.
Winter / Spring 2010
Salt Spring Island in the winter/spring 2010 is a TOTAL buyers market. However, only some sellers have lowered their prices to reflect the large number of listings. Properties that are priced to sell are bought quickly with competing offers. One home we listed in June, at a realistic asking price, had an offer in just days. This is the exception to the rule on Salt Spring.
- In the $2 million plus price range there is virtually no liquidity. Last year there were approximately 25 listings and only one sale. One would think the sellers might have a higher chance of winning the 649 Lotto than selling. Overpricing seems to be the rage at the high end. We see little in the way of price support levels at this range. The trend line looks like it's going down and the support positions seems to be a lot lower and will probably end up at the 1 million mark. At this price point, replacement price is a valid comparison tool. There are few, if any, properties that cannot be duplicated for less than the unreal asking prices. It is a myth to think that a property is so unique it cannot be duplicated with your own new dream home. Why would you over pay for some-one's dated, old, dream home. The big myth is it's worth x million because it is so rare. That would be valid if there were only 1 or 2 listings in this range. Supply and Demand is very basic Economics theory but apparently it does not apply to Salt Spring at this time.
- In the $1 million and up price range there is an abundance of homes on the market and some asking prices have fallen off. We have seen some listings start in the 4 million range and sell at about 1.8 million. Although it may not look like this on the MLS® see Re-listing info. There is very little market liquidity in this price range. At the 1 mil plus price range there is about a 7 year's supply of inventory, assuming no other homes come on the market and sales stay at the same level. Very few homes in this price range are of a high standard. We could probably count the Sub zero/Garland/high end kitchens on one hand. Most seem to have mid range at best kitchens and are rather dated homes. There are a few, good homes to be had by keen shoppers. Some of the sellers need to sell and have dropped their asking prices and made their home the value leader in this rather dead, high end market. With a good eye, one can find a real bargain in this range. It might need some updating but if it is priced right it may be a deal.
- In the middle of market $500,000 to $800,000 the prices are relatively stable but seem to be compressing down. There are lots of listings but steady sales at this price range. Some fine homes with nice views are available. If the home is in perfect shape, well located, with a sunny view lot and not overpriced it will sell fast. There are lots of buyers looking for quality homes in this range.
- The houses from $350,000 to $499,000 will continue to sell at a brisk pace. Renters are still moving up. There will continue to be a fast turn over of listings in this range. The homes may not be as well turned out but need to be well constructed, in a decent location and priced to sell. This end of the market is very price sensitive.
- The place to look this year might just be raw land acreage. With lumber selling in the 1970 price range and contractors looking for work, this might be a valid option this year. There were steady price reductions of raw land last year and one can expect to pay in around the $40k - $50k per acre price. If you can get a contractor to build at a fixed price you might be ahead this way depending on the price range, location and size of home. The thing to remember is that developers only make a profit when they sell the last few lots in a development. This is the situation to look at to find a deal.
The average selling price of a Salt Spring island property was $634,736 in 2008 and $495,047 in 2009.
Most buyers do not want to buy when the market is down. To make money in Real Estate (or any other market) you have to buy at the lows and yes this is the low of the market. It is just a matter of finding the really great deal that fits your needs. This year the sellers are nervous and if you are a strong negotiator you can get them down in price (if they really want to sell). If you are not a strong negotiator, you can ask us to help you. This is our specialty. There are tactics that can be used in a declining market that will get you the deal you want. Real Estate is a market like any other market and prices go up and down. The trend line for 2010 is down. Are we at the bottom? Who knows, but if you find the right house, at the right price, in the right location, buy it. You have to view real estate as a long term investment. Over the next 10 years you will not lose but if you think you can buy and flip in this market forget it.
If you have any questions please don't hesitate to call the Scott Simmons TEAM |