Statistics can be confusing and even more so when it comes to our real estate industry, due to the numbers with which we have to work. They tend to be more general than specific. However, they can indicate trends and the direction of the market.
If you look at a true statistical picture of our real estate market for 2012, overall, we ended the year flat compared to 2011. There really was not any measurable improvement. While there is a lot more development activity and improvement to our country’s infrastructure this year, buying activity has not yet been impacted by this positive momentum.
As a best estimate, we are very likely about a year away from seeing our market turn upwards. But, at least, it now appears this will finally happen. Starting sometime later in 2013, real estate activity will slowly start to improve on a consistent basis.
Articles have been written about how we are up 100 per cent or 200 per cent in sales volume, which is the dollar amount of sales. However, a few large purchases can skew those total values and it is not a true picture of the overall real estate market. Sales activity, which is the number of individual sales transactions in a year, is the best gauge of whether the market is doing better or worse. This represents the total number of people who are confident enough to make a major purchase of real estate.
When you look at sales activity for 2011, there were 462 sales transactions. In 2012, there were 422 – 40 less purchases. However, when you factor in 46 more pending sales for 2012 over 2011, the total number of sales where properties went under contract for the year, were 462 for 2011 and 468 for 2012 – a difference of only 6.
Our statistics do tell us some other interesting broad trends. 86 per cent of all sales for both years, 2011 and 2012, were for properties under $1,000,000. Below are some other percentages for the total number of completed sales (does not include pending sales) at different price levels:
In the category of $1,000,000 – $2,000,000 a smaller share of properties were sold (8 per cent down from 10 per cent in 2011). In the $2,000,000-$3,000,000 price range the share increased from 2 per cent to 3.5 per cent and properties over $3 million marginally grew their share to 2.6 per cent overall (up from 2 per cent in 2011).
Since 2008, our real estate market has struggled to gain traction. We saw that, again, in 2012, as we seem to continue bumping along the bottom. However, if we look at development activity in the country that creates value, we can gain a better feel for the future direction of the real estate market.
The amount of development and improvement to our infrastructure going into 2013 is far greater than anything we have seen in the last five years or more. This bodes extremely well for improving property values, over time, as the benefit from this development has a ripple effect across our real estate market.
We have been down for a long time. However, we will not stay down forever and change is in the wind. While 2013 may not be a stellar year, it will most likely be the starting year of several years of improvement. Real estate is a cyclical market and the cycle is about to change.
Any savvy investor should be looking at the trends in the market and start investing at the beginning of the cycle turning upwards. Focus on what will be the high demand areas. Britannia is one classic example.
Not only did the Britannia villas get beaten down by the recession, but they got a double whammy due to their cornerstone property, the previous Hyatt Regency Hotel, falling into disrepair and shambles for years. Values for these villas depreciated more than the overall market and in many cases, you cannot currently build them for their current sales prices. This is a conundrum.
When you look at the next five years for Britannia, plans are to have a new 4 star plus hotel, convention center, spa, pool, restaurant, marina area, newly restored golf course and some residences. All of Britannia will have access to these new, upscale, vastly improved facilities and will benefit from them and the value they create for the whole development property.
Additionally, Britannia is right next door to Camana Bay and the continually improving attraction there. The 42 acres of vacant land between the Britannia golf course and Camana Bay will also be developed, in the not too distant future, adding more value. Access will also be improved from Britannia and the hotel, as the critical mass now warrants easier traffic flow over to the Camana Bay town center.
This is just one example of the pearls that are out there. We have become so jaded over the last five years that sometimes we do not see the opportunity right in front of us, until we have missed the best chance to realise an increase in value and capital appreciation.
2013 appears to be the tipping point year for our real estate market. It may be time to take another look at this market more closely, for both investment and personal property ownership, while it is still very affordable.