Land Bank Revenues Sharply Down

By MIKE SECCOMBE

Martha's Vineyard Land Bank revenues fell some 14 per cent in the fiscal year just ended, as a result of the downturn in the Island real estate market.

As it closed the books on the fiscal year yesterday, the land bank reported revenues for the year ending June 30 were just under $11.1 million, compared with a little over $12.9 million the year before.

The public conservation organization's funding comes from a two per cent fee charged on most Vineyard real estate transactions, making it a good indicator of the state of the residential real estate market on the Island. Land bank revenues are used to buy and manage land for conservation, preservation and public use.

For the second successive year, the number of sales fell. They declined some seven per cent in fiscal year 2006 to 1,551 and fell again last year by eight per cent, to 1,430.

Land bank executive director James Lengyel said yesterday the decline in revenues comes as no surprise to the organization and does not affect its plans.

"We had projected a 15 per cent decline this year, so it was spot on," Mr. Lengyel said. He continued:

"We foresaw a general slowdown a year ago. After years of stability in the number of transactions, we saw a drop last year [2006] for the first time. It was a seven per cent fall. We took that at the time to be the leading edge of an impending small decline and planned accordingly.

"Our thinking related to a couple of things. One was just the natural real estate cycle. We go on the theory that here is something akin to an eight-year cycle. Maybe it's as small as five years, maybe it's nine years, but it somewhere around there. We thought it was time for the natural cycle to expose itself. And it did.

"Also, just from our own observations as an institution we thought the market was getting ready to purge some of the more assertive pricing. And that seems to be happening as well."

The figures certainly point to it. In 2006, land bank revenue actually increased 14 per cent, even though the number of transactions declined. There were fewer sales, but on average they were for more money, suggesting pricing remained strong, especially at the upper end of the market.

This year the situation was quite different. Both transactions and revenue were down, and revenue was down more sharply, meaning a lower average price.

"That [change] was remarkable," Mr. Lengyel said. "Here you see that the market in general was affected."

Given the land bank's apparent success in predicting the future of the market, is it projecting another revenue decline in the coming year, or has the cycle reached the bottom?

"We are projecting another decline this coming year," Mr. Lengyel said, concluding:

"That is not necessarily a reflection on the market so much as on the land bank's institutional philosophy of good conservative fiscal planning, but we're not prepared from the land bank's perspective to assume the market's ready to recover."