Priced off the Beach

Canadianbusiness.com has an article up about a group of mobile home owners in Florida who are considering selling their collectively-held land to developers. Most owners stand to make at least $1 million in profit… but would lose their beachfront property, and in many cases, their primary residence. The residents interviewed for the article were understandably torn between a cash windfall – for some, the first of their life – and a lifestyle they love.

In my country of origin, many people are faced with similar decisions. As recently as 20 years ago, it was common for a middle class family to be able to afford a piece of land near a beach or lake. Most started out by building a one or two room hut with a longdrop toilet ‘out the back’, and gradually expanded their ‘bach’ over the years to host kids and extended family gatherings. And the growth of beachfront communities to include shops, doctors and hospitals, along with an increasingly healthy retired population, have seen many people renovate their properties so they can move in permanently.

However, changes in market conditions – including ease of transportation to the coast, and extensive foreign interest in my home country – have sent property prices skyrocketing. A local newspaper recently profiled this humble beachfront property. The buildings are worth jus $25,000, yet it’s on sale for 1.6 million dollars, up from $160,000 in 1994. Another article gives an overview of bach prices within driving distance of our largest city, finding few listed for less than half a million dollars.

These prices might not seem unreasonable to those accustomed to property prices in the US, but it’s important to remember that the wage distribution in my home country is a lot flatter than it is here. I’ve poked around a bit looking for statistics, but it’s hard to find equivalent ones (that is, statistics that are measuring the same thing in both places). I did find that the median household income in the US was US$54,857 in 2001; in the same year, my home country’s median household income was $34,700 in local currency. But even those statistics are calculated by quite different methods. I’ll come back and update this post when i find better information, but until then, you’ll have to take my word for it!  Also, our dollar is less powerful than the US dollar, adding to overseas interest.

What’s interesting to me, as a person coming at this whole money thing from a human behaviour perspective, is the decisions people are faced with as a result of such dramatic growth. Retired folks suddenly find themselves living in houses worth several million dollars, but have a pension of only a few hundred dollars a week to live on. Families who have owned property together for 3 or 4 generations find themselves fighting over whether to sell a property and make use of the equity, or keep it and trade money for memories. And then there’s folks like these 7 families, who are stubbornly holding onto their own little caravan park as high-rise condominums go up all around them.

What choices would you make, if the value of your property increased 500% in 10 years? 5 years? 1 year? What if it was your primary residence? What if it was property that had been in your family for generations? What if it was the difference between having a comfortable retirement in a city, or a frugal retirement in your dream home?

If you were a shareholder in that Florida community, would you sell?

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