Now's the Time to Buy That Island

The recession has apparently put a real dent in the market for islands, The Seattle Times reports. There are about 500 islands currently for sale around the world, 20 percent more than a few years ago. A recent auction of Vendovi Island, one of the San Juan Islands near Seattle, failed to draw a bidder willing to meet the asking price or the seller’s reserve price, and only one island has sold at auction in the last five years. “In the high days there was so much surplus cash around, people just didn’t care,” says Farhad Vladi, who owns an island brokerage. “Auctions like this show very clearly where markets are. We are back in the years 2003-2004. Everything was in balance, normal.” [%comments]


Drill-Baby-Drill Drill Team

I can imagine a Utopian society founded on an island, using coconut based technology, bamboo bicycle generators, and all you can eat banana buffet run by the Skipper and Gilligan.

Living on a desert island is overated. I'll take the Isle of Manhattan or Paris.

CantuCMS

This is a very clear demonstration of the effect that shifts in the demand curve can have in the price and quantity demanded of a good. Two factors affect the demand curve in this case: change in income and customer expectations. Harder economic times means people have less money to spend on buying islands, causing the demand curve to shift to the left, and lowering the equilibrium price and quantity of islands sold on the market. Also, since potential buyers expect prices to keep falling, they keep off from buying right now, causing the demand curve to shift further left. Island owners have to either wait for the curve to shift right again or to lower their asking prices if they want to sell their islands. What is interesting is that apparently the supply of islands increased from previous years, but that is probably the result of the housing bubble from a few years ago (those islands ain't going anywhere so the supply stay high).

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Damian

So would increased volcanism change the supply curve? And if so, is there any way to legislate it? Some sort of magma tax or ocean subsidy? Or will sea level rise actually balance things out (for every island created, another one sinks beneath the waves). Food for though. Possibly marshmallows.

assumo

Too bad we can't just "discover" islands then wrench control from the local population like in the old days...

annaCMS

There is now a surplus of islands available for sale because the demand for these islands is too low. The amount of people that are willing and able to buy these islands at such high prices is almost none. Those who are willing and able to buy the islands at the price being asked expect the price to lower since there is a surplus amount of islands. This all causes the demand curve to shift to the left so much that there are no islands being sold at the moment. In order to have some islands sold it is necessary for the price to be lowered unless there is some kind of event that causes people to demand islands.

Eric M. Jones

Google Earth the Isla de Guadalupe, Mexico, 150 miles off Baja and 500 miles south of Los Angeles.

Fifteen lobster/abalone fishermen live there. 250 sq. miles, Peppered with extinct volcanoes, 10,000 goats that need removal. It would be a paradise without those invasive goats.

Mexico would sell it on conditions, I bet.

Mom

I know you guys have been waiting for this sale - let me know which island

JC

Market economists sure are dumb. If the market still isn't selling any of these islands, then now is NOT the time to buy.

Anyone who thinks 2003-2004 were years of "balance" and "normal" is clueless as to just how long this market had been pushing toward a bubble.

ChristianCMS

This can be explained by both the demand curve and the supply curve. The demand for an island right now is very low because of consumer incomes have decreased and their expectations have changed. Since now consumer get less paid they are less willing and able to pay for an island than before which shifts the demand curve to the left. This creates a decrease in the equlibrium price by decreasing it.

Islands are not being bought and the Vendovi Island was never settled because the bid from the person able to buy the island did not match with the price that the seller was expecting.

The way to solve this problem were there is a surplus amount of island and no one is willing to pay for it is by reducing the price of the island a little, and observing if there is a change in elasticity demanded. If sellers see a major change in the elasticity demanded were the percentage change of quantity is high than the percentage change in the price, then seller should lower prices. Maybe by lowering the price the seller will not be so happy but it helps them in a way because they will have more island wanted because of decrease in the price.

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frankenduf

betcha island speculators believe in global warming

Emmi

This would make easy to answer those "what would you do if you won the lottery" questions.

Ray

I would note that with the chances of a zombie infestation low at this time that the demand for island fortresses would also be low. One way to increase the demand would be to hasten the inevitable zombie infestation.

Phil Free

The FT also had an article about this a couple of weeks ago. Their angle, though, was that private islands are now cheap enough to buy. Maybe not a huge surprise.

chuy

Wow that is some thing els. Well that does make sense a few years earlier we were beeter off then we are now. i can understand why people are being more careful of what they are buying.