Throughout Canada's main cities, there has been an upsurge in sales action, year to date, in what I would term "low end residential" -- in other words, property that would be in the realm of a first time buyer, attracted by low interest rates, and also by an investor (looking for viable rental options, for passive income opportunity). Undeveloped land, commercial items, and higher end/luxury properties did not easily find action. In rural areas, predominantly secondary home/discretionary regions, this action also did not take place. Such places can be put "on hold" during insecure market moments.
Yes, there is a lot of money, resting in cash, with nervous potential buyers adopting a wait and see attitude. On the one hand, the deflatiion argument has people wanting to remain in cash, so as to benefit from further bargains, particularly in the "move up" properties. I heard from one seller, not in my area, who noted that his property had been shown 17 times in the past five months, all qualified potential buyers, and only one party had "acted" (purchased another home). That left the remaining 16 purposely "waiting"...all of them, according to the realtor, felt that prices would continue to go down, and so they were waiting to benefit from their "clout" as potential cash buyers, when they felt things had "really" bottomed.
Newsletters, read by serious people, who did not experience significant losses in Sept/Oct/Nov. of 2008, and who do have cash holdings, project that there will be further severe drops in real estate valuations. One such newsletter, by a respected "deflation sayer", promises there could be further declines of up to 40%, in some areas. This, after the 20 to 30% declines already experienced, in the past year. While this kind of prediction is targeted to a U.S. readership, we cannot assume we will escape anything, just because we live on the Canadian side of the border. In erasing geography and time, the internet evolved the "global village", and so we are all interconnected.
On the other hand, the inflation scenario notes the continuing collapses of banks and financial institutions, plus the need of large "global" banks for more government help (the Swiss USB, the U.K. Northern Rock and Scottish Bank, among such), which implies further printing of paper currencies, more bailouts, diminishing value of cash holdings...impending hyperinflation as an end result. This kind of fear would seem to propel such potential investor/buyers back into good real estate hard asset holdings. Such, though, could be condos in Vancouver or townhouse in Victoria, or...not, then, necessarily a second or third home property, in an area such as the Gulf Islands or Tofino/Uclulet or Whistler or Osoyoos, or...such discretionary areas can continue to be put "on hold".
However, that very "offset" characteristic of a discretionary area, just a little apart from the potential chaos of a city, if things unravelled, might drive people towards places like the Gulf Islands, with its cap on growth, or to Tofino/Uclulet (same issue of limited inventory), etc. Security, a "safe haven" search, would make such places of more interest than a city market would deliver.
Hmmmm...still an either / or proposition, with no middle ground / no grey area in sight...either deflation/collapse or inflation/erosion of value of cash/currency.
There we all are, then, still sloshing around in the pool of uncertainty, with no clear indication of where to splash forward....towards the deep end or the shallow? Where did we say we could find that crystal ball?
Important, more than ever, to be thoughtful, to practice our peripheral vision (tunnel vision gets us nowhere!) so we can see some movement on the edges that could aid us, to practice our editing function (have to turn all that raw data into real information), and to pay attention to our creative inspiration. There are no real experts...no one "knows". We have to look to ourselves, here, and make some decisions about paths for ourselves.
As Heraclitus reminded us, back in Ancient Greece, the only constant in life is change.
How may I help you to discover special Salt Spring Island & the Southern Gulf Islands? Call me!
