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Originally published October 15, 2010 at 10:02 PM | Page modified October 19, 2010 at 2:49 PM

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Islands are a tough sell in current market

Though the San Juan Islands are recognized worldwide as prime real estate, even those with the money to consider buying an island are holding off to see if the island market will drop further.

Special to The Seattle Times

Think it's tough selling a house in this market? Try unloading an island.

Vendovi Island, a 216-acre property seven miles north of Anacortes, has been on the market more than two years. The island, accessible only by boat or floatplane, features six beaches, a four-bedroom house and protected harbor.

Vendovi has been marketed as one of the gems of the San Juan Islands by auction house JP King of South Carolina. But when it came to auction Sept. 30, the sole bid, for $3.3 million from a preservation trust, did not come close to the buyer's $14.5 million asking price or confidential reserve price set by owner David Fluke.

The recession slowing the housing market has also affected high-end real estate, including sales of private islands. Though the San Juans are recognized worldwide as prime real estate, even those with the money to consider buying an island are holding off to see if the island market will drop further.

"A lot of clients today wait and get everything for half the price," said Farhad Vladi, owner of Vladi Private Islands, an island brokerage with offices in Canada and Germany. "At this moment it is wait and see."

Though the Vendovi auction drew several interested parties and helped pinpoint potential buyers, the price tag has proved a deterrent. "We do suspect that it will go for less than that," JP King spokeswoman Caley Newberry said.

Before the housing market tanked in 2008, the Fluke family likely would have had a much easier time selling their island, which has been appraised for more than $10 million. But even in better times, island buyers balked once the price goes above a certain number.

"As soon as you hit the $2.5-$3 million mark, the number of buyers just plummets," said Chris Krolow, CEO of Private Islands. "They want to build a vacation home, and for $3 million they can do that anywhere in the world."

The only internationally marketed island to have been sold at auction during the past five years was New York's Fox Island, a 263-acre property once owned by a former governor of New York. It sold for $3.78 million in 2007.

Both Vladi and Krolow described Vendovi as a quality island, one of perhaps 100 "quality" islands on the market, Vladi added.

"I think it's definitely worth what the owners think it's worth," Krolow said. "There are islands 10 percent of this size that are on the market for half the price."

Worldwide, there are about 500 islands up for sale, about 20 percent more than there were a few years ago, Krolow said. On the low end, islands, many completely undeveloped, are priced in the hundreds of thousands of dollars. On the high end, hundreds of millions.

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Those with the wherewithal to consider buying an island might be interested in Little Hog Cay, a 25-acre, $1.9 million barrier island in the Bahamas, according to Private Islands. Or there's the 148-acre Caribbean Island in Quintana Roo, Mexico, on the market for $9 million. Sixteen-acre Ram Island south of Maine is going for an "affordable" $595,000.

On the other end of the price spectrum, there's Rangyai Island, a picturesque 110 acres of white sand and tropical forest off the coast of Thailand, a convenient 20 minutes from Phuket International Airport. Price: $160 million.

In the San Juans, six islands are for sale, said Wally Gudgell, who has spent more than three decades selling real estate there. In addition to Vendovi, Allan Island, which boasts an airstrip, Young Island, Reef Island and two unadvertised islands are all looking for buyers. The islands are priced from about $1 million to $12 million, Gudgell said.

The Fluke family purchased Vendovi Island for about $225,000.

"Generally speaking, the most attractive island purchase is at least a few acres in size and has development permits in place," Krolow said.

During the housing bubble, islands bounced like tennis balls from one speculator to the next.

"In the high days there was so much surplus cash around, people just didn't care," Vladi said. "Auctions like this show very clearly where markets are. We are back in the years 2003-2004. Everything was in balance, normal."

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