What affects the Salt Spring Island, BC, Real Estate?
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Canadian dollar vs United States dollar
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demographic shifts
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Salt Spring Island zoning restrictions
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overall global economy
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interest rates
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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 USD, it would net them a $1,000,000 house. At the height of the market in 2005 that same property would be worth $2,000,000 CAN ($1,800,000 USD). The US buyers made money on the run up of the property prices and the increase in value of the Canadian dollar compared to the American dollar. This had a huge effect on the Salt Spring Island, BC, real estate. With the CAN dollar at par with the US dollar this has virtually stopped US buyers from coming to Salt Spring and turned US owners into sellers. With the US in a recession, lots of US owners are looking at repatriation of their money at par.
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 will have its population double to about 20,000 if the zoning rules stay in place. The zoning bylaws and Islands Trust are in place to control development, not stop it. Here is a link to the land use bylaw . 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 houses 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 have had a slight upping of rates in the last month and the rules to qualify for a mortgage. This is affecting the low end starter homes.
Supply and demand
There is currently an over-supply of Salt Spring listings (Salt Spring homes for sale). Seasonally adjusted there are about 430 plus listings to a population of about 10,000. If you compare that to Calgary when it was really booming(2006), there were 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 listings. To have a cool market Salt Spring would have 90 listings.... but now we have 430 plus listings.
What would happen in Calgary if they had 43,000 listings? Their Real Estate market 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 on Salt Spring;
The graphs above show the price elasticity on Salt Spring as the prices went up sales dropped off.
Below is a historical look at lot activity from 1959-68.
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 that 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.
Here is the list of the 179 homes that sold in 2010 on Salt Spring Island.
The list below were sold on the Vancouver Real estate board.
This one property for some unknown reason has been sold 5 times over the last 20 years and listed 13 times. It is a good case study of Salt Spring Island Real Estate. Look at the sold prices and look at the asking prices. This house is a example of the market trend. The last seller did install a new cedar roof and other improvements. The 579k asking price is an example of overpricing and market stagnation.
Here is another home that shows the market trend. Note to reader; in 2005 it was completely re done.
This is a good example of how the market has trended. Look at how hot the market was in 2007, 22 DOM. IMO they were lucky to wash out of this home. I did not like this listing.
This is an example of overpricing and believing in the long sales cycle. 1640 Days on the market. Wow unreal.
This is a list of the waterfront 19 homes that sold in 2010 on the Victoria Real Estate board and the homes that sold on the Vancouver board are below. Some had very small water frontage, some were high bank, one had multiple offers in foreclosure court. For a detailed list email Scott.
Note to reader; Welbury was first listed at 1,450,000 and was on the market for 1402 days. Prevost was first listed at 3,600,000. Do you really care if you insult a seller with a low offer? Some sellers seem to think it is OK to insult the buyers with outlandish asking prices.
note to readers; the king rd property was first listed at 3,200,000.
This little table came from the 1970 Gulf Island Study and is very interesting and tells how little waterfront is actually available.
This is a home I had an offer in on in July 09 and they would not negotiate. They failed to calculate the opportunity cost of the capital. This is the trend I see; high asking prices, with the homes on the market for a long time, then finally reduced and sold.
Sold home and or lots on Salt Spring for 2011. 147 in Total Sales. 141 on The Victoria Real Estate Board and 6 on the Vancouver Real Estate Board.
One Salt Spring agent is not on the Victoria Real estate Board She is on the Vancouver Board.
Wow only 8 homes sold in 2011 at over 1Mil.
Spring 2012
Salt Spring Island in the spring 2012 is a TOTAL Buyers' market. However, only some sellers have lowered their prices to reflect the large number of listings. Do not underestimate a seller's ability to overprice. Greed holds no bounds in a boom market or down market. I have had only one seller (Mrs M) ever say to me "just sell the place fast". The home sold in less than 30 days for fair market price at 330k. Properties that are priced to sell are bought quickly, frequently with competing offers. If the owners list at a real accurate/realistic listing price (based on value and accurate CMA of sold similar homes) and are not taken over by the "greed cloud", the home will generally sell. One home we listed in June at a realistic listing price, had an offer in just days. This seems to be the exception to the rule on Salt Spring. A good number of sellers interview 3 or 4 agents and tend to list their home at the highest list price they hear. I personally only list the house if it is very very close to a accurate/realistic listing price. According to the BC real estate service act, which all agents follow, there are no rules I'm aware of against overpricing. The listing agent's duty is to the seller and usually the goal is to sell at the highest price so overpricing is common. In my opinion overpriced homes will sit and stagnate on the market and years later sell at below what would have been a accurate/realistic listing price. Overpricing can cost you money!
Here is a quote (with permission) from the book Bought Not Sold by Ray Wilson on page 47 Overpricing and agency interest (the "upsides") "The same home advertised over a long period loses its attractive power, but the optimum is to have it around long enough to draw as may buyers as possible before being sold. For this reason, the tendency of owners to overprice their homes can have an upside for the agency, preventing the "premature" sale, letting the home attract buyers for other sales until the owner adjusts to its real value."
On Page 46 there is this quote "LISTING AGENCIES LIST TO ATTRACT BUYERS".
Buyers need to make sure they are buying Value and not a overpriced home.
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In the $2 million plus price range there is virtually no liquidity. In 2009 year there were approximately 25 listings and only one sale. Not much changed in 2010 and only 1 home sold in this range. 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 seem 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. Most homes in this range are very dated and poorly turned out. If you are used to a high end home you will probably be shocked at how rough most of these homes are. Very very few are nice.
 Most have mid-range kitchens. Very few have kitchens like the photo above and most need a total refit. If one is expected to pay $2 mil or more one would expect a stunning home in perfect pristine condition with no work to be done. Sales data in this range tell me most homes in this range are grossly overpriced. If the home did not sell at the $2 mil price range in the peak of the market of 2005- 2007 how is it worth that much now? It is not....worth that much now...get over it.
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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. In 2010, 11 homes sold, in 2011, 8 sold 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/Wolf/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 at less than $1.2 mil it may be a deal. Prices still need to come down to move the inventory. Just look at what happens in a mall with all the dated stock, the SALE signs go up and the prices are chopped until the supply is gone. If a home is very sharp, with a stunning views, hardwood floors, high end kitchen, great open design and priced at $1.5 mil or less it will sell. So many are old, poorly designed homes that at best are tear downs but who is going to buy a $1.6 mil tear down when there is the odd perfect home at the $1.5 mil range. There is a common thread that runs through the homes that have sold; they were all very sharp and crisp not one dated one in the mix. Buyers in this range are very, very astute and know value.....most of the homes are not representing value or they would be sold.
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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 in this price range. Some fine homes with nice views are available. Some waterfront homes can be found in this price range. 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. This is a market that offers the most value for your money. For $700k you can expect to find a stunning, newer, water view home that should come with a nice master bedroom suite, hardwood floors and be almost perfect. There are homes at this price range that can not be built new for the same price as what they are offered (even when allowing for depreciation). There is value in this range if one shops well. I have had a few clients buy fabulous homes in this range at bargain prices. If the home is two years old 3000sq ft and in mint shape on a stunning lot and offered at less than replacement price why would one want to build and go through all the pain of it? Some of the sellers of the value leading homes in this price range have been hit hard by the economic times and need to sell. Again, one has to wade through the jungle of overpriced, poorly turned out homes to find the real deals in this range.
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The houses from $300,000 to $499,000 will continue to sell at a brisk but slowing pace. Not as many renters are moving up. The new mortgage rules have made it harder for first time buyers to qualify. 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 and has slowed in the last few months because of the rise in interest rates and the banks being very tight with the mortgages.
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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. Building lots have been selling at a brisk pace with 28 sold in 2010 at really reduced prices. 5 acre lots are available at less than 200k.
The average selling price of a Salt Spring island property was $634,736 in 2008, $495,047 in 2009, $507,684 in 2010 and 496,978 in 2011.
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 very basic tactics that can be used in a declining market that will get you the deal you want. If you call me I can tell you about this simple but effective way of getting a deal. In a nut shell it's all about not falling in love with the home but falling in love with two or three that will work and seeing which one of the three sellers really wants to sell. It is very simple system of low ball offering. In a down market never think you are going to tick off a seller. They have probably never seen an offer and some will jump at the first one they get.
Real Estate is a market like any other market and prices go up and down. The trend line for 2012 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. Think about the replacement cost comparison. 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.
Thanks for reading this and hopefully I have not bored you to death. I really do get caught up in working for clients who are really wanting that super home. It can be a lot of fun finding that perfect special place. Everyone has a dream. That's why I find an hour of time over coffee can make it all so much easier. In some ways I really do love my job and forget I even get paid to do this. With every client it's like an energy rush of searching, showings, laughing, crying, buying, moving... I think some clients are just happy getting their home and not seeing me every day... I do love this little rock and hope you move here. Good luck with the process and try not to be too addicted to the shopping part. It's very addictive because there is always something new to see. If I have one goal it is not to have anyone buy a overpriced money pit. Let's find a nice, sharp, crisp home with no problems.....a home that you can be proud to own and one I can be proud to help you buy.
I'm not super smart or a rocket scientist but real estate is a predictable market. With some degree of certainty I will guess that 2011 will see a market that goes sideways with no price increases and more of a chance of the prices trending down. It really comes down to the basics, location, state of home and price. I can generally predict which homes will sell in 2012 and all will have great locations, staged perfectly and price comparable to the sold homes listed above.
If you email me scottonepercent-website@yahoo.com I will send you my top 5 picks in any price range. Obviously I like nice homes that represent real value: ie location, state of home and price. By now you have probably surmised that I dislike overpriced poorly turned out homes. They do nothing more than clutter the market.
Good luck and make sure you chose your buying agent and home wisely.
Cheers.
Scott Simmons TEAM
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