The Call of the Castaway
Scores of private islands are for sale off the North American coast, with prices down 25% from their peak
Yahoo! Finance/Greg Wilson/Michael Saunders & Co. - An arerial view of Little Bokeelia Island, the nation's most expensive island listing at $29.5 million, according to Realtor.com. This island includes a large …more main house and cottages. less
Americans lured by the fantasy of owning a private island don't have to go far asea.
From the sunny Florida Keys up the chilly Canadian coast, values of private islands off the coast of North America have tumbled an estimated 25% or more since the housing downfall, real-estate experts say. Now, prices are starting to attract buyers again.
"There are small signs of a recovery," says Farhad Vladi, president of Vladi Private Islands, a global brokerage based in Hamburg, Germany, that he started 35 years ago. "We have inquiries and that was not so much the case last year."
So far this year, Mr. Vladi has sold 50 islands across North America. That's up from 10 in all of 2011.[More from WSJ.com: Lessons from the Ultimate Safe Houses]
There are roughly 21,000 named islands in the U.S., though some are too small for habitation and others too marshy for development, according to the U.S. Geological Survey. Canada also has about 21,000 named islands with scores of unnamed ones, according to Natural Resources Canada, a government agency. Islands that are developed or have the building permits in place that allow developments are the most desirable, as are those with deep-water access.
In September, a buyer paid $950,000—a 27% discount off the listing price—for the two Lower Birch Islands, which span nearly 30 acres in Addison, Maine. The larger island features a three-bedroom, post-and-beam home that uses solar power. In Nova Scotia, the 77-acre Gravel Island, which features a rustic log cabin relying on well water, recently sold for about $400,000, slightly above the asking price.
Islands that don't already have building permits can be a hard sell, as William Scherer is learning. In 1983, his father purchased 47 undeveloped acres with picturesque views located just south of Duck Key in the Florida Keys for $400,000. Because the two islands, known as Tom's Harbor Keys, don't include building permits, he recently listed them for $1.5 million, well below the $10 million he estimates he could command otherwise.
It's unlikely the buyer could get any permits easily. To protect the local habitat, which, includes coral reefs, receiving permission to build in the Keys is complicated, competitive and can take a decade or more. Florida allots the area just 255 annual building permits, and requests are primarily judged on environmental sensitivity, said Christine Hurley, Monroe County's growth-management division director.[More from WSJ.com: The Man With a Million Acres]
Given their location in a federally protected area, the Tom's Harbor islands can't be linked to water, sewer or electrical systems. With no flood insurance or a federally backed mortgage possible, "the owner would be challenged and he'd need to have all cash," Ms. Hurley said.
For islands that can be developed, advances in technology have made it easier and more affordable to generate power, filter water and connect with the outside world. Manufactured housing, long been associated with flimsy trailers, is increasingly popular as the designs look more like a traditional weekend home or vacation cottage.
Still, Ling Graves, president of Hilton Head, S.C.-based Graves Construction Co., estimates that building on a private island costs 40% more than the mainland because manpower and materials have to cross the water. A simple cabin could cost about $100 a square foot, while a high-end custom abode would cost much more.
Because bringing power lines to an island is expensive and requires government permits, Mr. Graves advises using a generator for electricity, requiring about $20,000 for an average home. Expect to spend between $6,000 and $8,000 to install a well for water.
Island construction requires meticulous planning: There won't be any quick trips to the hardware store. "If you forget about it, you've definitely lost a day," he said. "When you're remote, you're remote."[More from WSJ.com: Psst. Wanna Buy a House?]
Bob Rainek of Milwaukee has listed three small islands in the Keys. Two of the islands include homes, while the third comes with a docked houseboat. Mr. Rainek, a 63-year-old real-estate investor, says he loves spending time on his islands. "I personally get the feeling of being very unstressed," he says, adding he often catches fish and lobster for dinner. "You have the ultimate waterfront property. Never a day goes by where we don't see dolphins jumping outside our windows."
Mr. Rainek paid $250,000 for his first island 20 years ago, the same price he paid for a second island a decade ago. He hopes they'll sell for around $1 million each. He also aims to nearly double his money on island No. 3, for which he paid $800,000 five years ago. Mr. Rainek says he's looking to retire and give back to the world, possibly by spending time doing humanitarian work in Sudan and Congo.
Potential buyers of private islands generally tend to be wealthy, value privacy, like nature and enjoy boating and other water-related activities. Men are big shoppers, brokers say. For some, owning an island is the ultimate sign of success, one that carries big bragging rights. "It's like the endgame toy," says Chris Krolow, chief executive of Private Islands Inc., a global island brokerage based in Toronto.
Listings website Realtor.com has 460 listings that include an island, with 205 that feature a home. The median price is $950,000, with the cheapest listing, $119,900, in Milan, N.H. At $29.5 million, Little Bokeelia Island south of St. Petersburg, Fla., is the priciest. Mr. Krolow has more than 220 for sale in North America, up from 190 a year ago. He has 60 islands available in Ontario, 28 in Florida and 15 in Maine.
Mr. Vladi urges would-be buyers to start by renting. Then, once they've identified a particular island, he suggests spending time with the mainland locals, who often form a close-knit society. Shoppers should also scope out medical care, which should be within a 90-minute radius of the island.
Check out the plants and animals on the island. "Do you like the flowers? Do you hate snakes? Are there too many mosquitoes?" he says. "You can only find that out if you are there."
While there is no guarantee island values won't fall further, the market is "coming back stronger because prices are more in line with what they should be," Mr. Krolow said.