A potential island paradise has turned into a migraine that’s not quite over for a man who attempted to build his dream home on Mayne Island, B.C.
Seven years ago, Wilfred Klingsat, who is 73, bought the 1.3-acre property with wide-sweeping views of Active Pass in order to build a 4,000 square-foot house for himself and his wife.
But about halfway into the project, construction cost overruns and conflicts with the builder blew the budget. He found himself faced with unexpected bills, such as the $5,600 it cost just to blast a big rock and $100,000 for underground wiring and water storage tanks. And then Mr. Klingsat’s wife was diagnosed with a heart condition that required her to be near a hospital, which made island life an unlikely option since it doesn’t have such amenities.
“The doctor said she shouldn’t be there,” says Mr. Klingsat, who owns and operates a Booster Juice store in Duncan.
Today, their house is only a wood frame shell that looks out over one of B.C.’s most dramatic views, with the Lower Mainland in the distance, and regular sightings of ferries, whales and seals. The tiered wooded lot is only a five-minute drive to the ferry.
It is the idyllic best that B.C. has to offer, and yet the Klingsats won’t even break even on the near $1-million they spent on the property and construction. They have relisted it for $539,000, after previous listings at $649,000 and $699,000 didn’t get any offers.
“Everybody loves the place, but the people don’t want a house that’s not finished,” says Mr. Klingsat, who gave up on the project six months ago. “And I can’t do it. I haven’t got any more money to put into it.
“The whole economy everywhere is lousy – nothing is gangbusters. There are places for rent all over here on Vancouver island.”
Mr. Klingsat’s situation demonstrates the risks of island real estate investment, particularly where construction is concerned. He had purchased the property for $600,000, at the height of the market. At the time, it seemed that any property in B.C. was only going to go up in value. When the real estate market temporarily crashed in late 2008 and early 2009, nobody could have seen it coming. But recreational property is the hardest hit when there’s a downturn, analysts say, and is particularly vulnerable. As well, construction costs on an island are at a premium because of added transportation expense and extra time that it takes to build, or renovate.
Diana McMeekin, founder of Artemis Marketing Group, has worked in residential real estate for more than 40 years, and so she knows the housing market. She also knows the pros and cons of island life because she’s owned a secondary house on Keats Island in the Howe Sound since 1997. She has heard nightmare stories about island building projects that have cost homeowners their savings. It is not a project to be undertaken lightly. Mr. Klingsat, she says, is not alone.
“It happens very frequently that people don’t make money on recreational property,” says Ms. McMeekin. “So don’t do it to make money. In all likelihood, that’s the wrong reason – it’s just a bonus when that happens. The main reason you should buy recreational property is for the lifestyle, for yourself and your family.”
Ms. McMeekin renovated her Keats property twice, which required truckloads of materials brought in by ferry and barge. She likens it to a “military operation.”
“I would think I had a 20 per cent premium to get the stuff there, which is not sexy money. It’s gone. So you should be prepared for that,” she advises.
“The other thing is, with a secondary home, your choice of contractor becomes very, very important because you will probably not be there every day. By being on-site, you can prevent mistakes or other things from happening, and you also keep your contractor keen and eager because they know you are there and watching. Whereas with a secondary home, you go by to check after a month, thinking ‘they must have made a lot of progress,’ and then you go there and you’re shocked at the lack of progress.
“You can lose control very, very easily because there are so many logistical things you have to think about.”
That said, she also loves her Keats Island retreat, which she gets to nearly every weekend most of the year. An ardent fan of island life, Ms. McMeekin says it’s also an optimal time to purchase a recreational property in B.C.
It is a buyer’s market, she believes, because of the spin-off effect of the American market’s downturn. Wealthy British Columbians and Albertans who would have otherwise purchased locally took advantage of bargains to be had in places like Palm Springs these last few years. As a result, the recreational market in B.C. has taken a particularly hard hit. Ms. McMeekin says her Keats Island home has also dropped significantly.
“It’s definitely worth a lot less than what I could have got for it at the height of the market,” she says. “There was a time I could have sold it for $1.2-million. Prices have come down massively.”
So, while the bargains down south are long gone, the ones in B.C. are popping up – such as Mr. Klingsat’s home.
Mr. Klingsat’s realtor, Ian Watt, agrees that the market is at a low. He’s been buying up property in the Interior as his own investment. Once people start snapping up bargains, as they did in the U.S., it will be too late. But it’s often difficult for people to go against the tide, he says.
“This is the time to buy recreational property because nobody is buying it,” he says. “But we are like sheep. We only buy when everybody else is buying.”
Ms. McMeekin concurs.
“The values are terrific. You can have your dream home – you just have to be incredibly careful about it.
“It’s bad news for sellers, but great news for buyers.”