Private Client Services - Sign In
User ID: 
Password: 

2011 Pender Island Property Market report

By Howard Sanders • December 21st, 2011

PENDER ISLAND REAL ESTATE MARKET REPORT FOR 2011

This has been a challenging year for the real estate market on Pender Island. Caught between the continuing hot market in Vancouver and the fluctuating but still healthy market in Victoria, we have seen almost no growth in the number of sales in 2011 compared to 2010. Depending on whether you are a glass half full or a glass half empty person will dictate how you look at this statistic. The glass half full conclusion would be that, despite major challenges to the recreational and retirement market due to the present global crisis plus the large increase of available inventory, we are still holding our own despite a fall of approx. 5-10% in property values since mid 2008. The glass half empty observer may conclude that despite low interest rates holding steady, plus the drop in price of many island properties, we haven’t managed to increase our number of sales year to year.

As usual, I think the truth lies somewhere in the middle. I’m generally a glass half full person so I’m cautiously encouraged by our residential sales numbers holding this year, and although 2011 Q4 sales are down this is traditionally a slower period. If we look at the charts below we can see this clearly. Look at the big spike in the amount of current residential listings (green) that occurred in Aug 2008 as the financial meltdown took hold. Compare that to the number of residential sales (blue) and you’ll see that these have remained relatively constant.

RESIDENTIAL ACTIVE LISTING TO SALES – PENDER ISLAND – 2006-2011

Bare Land sales over the same period have been affected more negatively and have been at the lowest sales numbers since 2008. This may be partly due to HST currently being due on new construction, but with the repeal of this coming into effect in March 2013 it may have a positive upswing in land sales although a possible increase in interest rates may offset this. Buyers with long range plans for construction are taking advantage of current low interest rates and good land prices, but they were few and far between in 2011.

BARE LAND ACTIVE LISTING TO SALES – PENDER ISLAND – 2006-2011

 

So let’s now look specifically at the residential and land sales compared to listings specifically for 2011. Consider the chart below to see the seasonal trends of lower listings and sales during fall and winter, as compared to higher listings and sales in spring and summer. However, it also shows that on a month to month average, with the huge increase in our current inventory from 2008, the percentage of residential listings actually selling is only in the region of 3-4% month to month over the year. Prior to August 2008, this percentage was closer to 15-20% and clearly highlights the effect of high inventory compared to flat sales. This has created a buyer’s market on Pender, dropping property values and extending the amount of time it takes to sell. High inventory also makes it look as if the whole island is for sale, further affecting a buyer’s willingness to pay a higher price.

RESIDENTIAL ACTIVE LISTING TO SALES – PENDER ISLAND – YTD 2011

 

This trend is even more obvious when it comes to bare land sales. Prior to 2008, the average number of land listings on Pender was between 20-30 at any given time. Since 2008 this jumped to between 60 and 80, an increase of close to 300%! With a drop in land sales in general in 2011 this makes for an average sale to listing percentage of approx. 1.5% month to month  over the year, compared to a rough month to month median trend of between 15 and 20% prior to August 2008.

 

BARE LAND ACTIVE LISTING TO SALES – PENDER ISLAND – YTD 2011

 

So this then has been the challenge for Pender Island realtors over the last 2-3 years. With a massive increase in inventory, a drop in the number of qualified buyers, a reluctance of the banks to lend and the devastating global financial crisis it is hardly surprising that the current market is a difficult one, particularly for sellers.  Property is taking longer to sell, there are fewer buyers than in a normal buyer’s market due to the financial crisis, and those buyers who are interested are well informed and therefore looking for a good deal – something not all sellers are prepared to consider.  To make matters even more difficult, many buyers are offering low ball offers to start and are more particular when it comes to the condition and documentation of the property. Houses that have been well maintained with all their permits in order, have serviced their septic and well systems and have documentation to back it up, and which are priced correctly in the current market are the ones that buyers are looking for. Anythingoverpriced, or priced higher to ‘test  the market’ are not even being shown at present as they have dropped off the radar. Other than that, it is the lower end properties between $200-300,000 that are popular as these can be turned into rental properties, generating income and offsetting costs until there is a upward market turn.

So what does the future hold? To be frank, I don’t know for sure. If all things remain constant, I suspect that 2012 may be very similar to the last two years with a higher inventory and flat sales. Residential sellers who bought from 2008 onwards and who are now trying to sell are unlikely to recoup their purchase price, most likely getting between 90-95% of what they paid unless they have renovated or added some sort of value, either in increasing the square footage or quality of their property. Bare land sellers who bought in the last 2-3 years will also be affected in a similar fashion but can increase the saleability of their land in the future by doing such upfront  things as getting a survey done, or a geotechnical report if there is a slope or danger of rockfall. Some buyers are just nervous of the Islands Trust bringing more regulations in after purchase that would either restrict or increase the costs of development. Therefore, anything a seller can do prior to listing which would reassure a buyer will only help in a sale.

I hope that if the world situation does not deteriorate further we may see a bump by the end of next year.  The volatility of the stock market is making investors nervous, as is the possibility of a Eurozone collapse. Such uncertainties directly affect our market on Pender Island as essentially we are still a retirement and recreational market. Retirement funds, mutual funds and dividends from stocks are the financial engine that drives our market. Reduce these funds, or put them under pressure, and confidence falls as we have seen clearly since August 2008. Also, it is very important to remember that the Vancouver market IS NOT the Pender Island market. Vancouver’s healthy  home sales have been driven mostly by mainland Chinese buyers essentially getting their money out of their homeland and into real property in one of the best markets in North America. Pender Island is a rural location, one not generally attractive to sophisticated Chinese buyers who equate rural with lower income and social levels. By far, most of my buyers are from Vancouver and Victoria, with a  few from Saskatchewan taking advantage of a rise in property values in that province. Americans buyers have been missing in action for obvious reasons, as have the traditional Alberta buyer who we have relied on for many years in the past.

Conclusion

From the above report the immediate future looks bleak, but any prediction of future events  depends on current conditions remaining unchanged. Unfortunately, world events are so fluid at present that to predict anything would be tantamount to guesswork. I hope the Eurozone crisis is resolved, I hope the first glimmers of an improvement in the US economy will continue, I hope that Iran and Syria will not be invaded and I hope that slowly, the peaks and spikes that occur almost daily in the world’s stock markets will flatten and become more consistent as confidence grows. If all the above happens I can see our market gradually improving, with 2013 being the beginning of a sustainable improvement in the world economy which, in turn, will improve our local retirement and recreational market.

In the meantime, Pender Island  residential sellers need to make sure they listen to their realtors and don’t price themselves out of the market, maintain their property to make it appear as attrractive as possible, have as much documentation as possible on the property plus any improvements, and be prepared to work with any offer even if it is low. Bare Land sellers must to do the same as far as documentation and access is concerned, but need to be prepared for a potentially long wait for a sale as this section of the market is the softest of all. Hopefully, with the repeal of the HST in spring 2013, making construction cheaper and with a sustained global upturn this soft sector may harden as 2012 progresses.

Howard Sanders December 21, 2011

Comments

The economy has picked up and there’s more interest in people buying and selling these days. This seems to be the trend in Calgary. Like this site. Looking for ideas for my website to improve it myself.

 

Leave a Comment

« | Home | »

Get the Most for Your Money

March 17, 2010
by: Howard Sanders • Blog, Tips

Don’t Pay Too Much

February 10, 2010
by: Howard Sanders • Blog, Tips