More than is needed, less than is wanted

Unsold inventory makes this a good year to be a buyer, but not a builder.

One word that we've heard about the recovery that's been underway for the past year or so is "selective".

And while Western Canadians are generally shaking off the after-effects of a recession that continues to be felt in many parts of the world, the recreational property market in the Thompson-Okanagan is sending out some interesting, if not contradictory, signals.

In the years 2002 to 2006, recreational property provided a pretty lucrative and irresistible investment vehicle for "flippers" -- people who signed contracts on several units of golf course and lakefront property and pocketed tidy profits in the two to three years before officially closing. Of course, most had very little intention of occupying or renting their units and sold as a rising tide of prices lifted all listings, especially in the Okanagan, Shuswap, and parts of the east Kootenay close to the Alberta border.

That all came crashing to a halt, and the summer of 2009 saw serious discounting happening on projects that had run into financing issues or where cash-strapped contract-holders were getting squeezed as projects completed and "move-in dates" loomed.

So as snow melts off the Interior mountains and the sound of wakeboard boats echoes off the hillsides, it's time to take an early read on how recreational property is faring in the Okanagan. What can soon-to-be retirees, golfers, wine lovers, and other vacationers look forward to this year?

At the higher-end prices, there is already a lot of inventory on the market. Greater Kelowna -- extending from Peachland to West Kelowna across the bridge into town and north to Winfield -- has almost 400 properties over $1 million. Even at the height of the real estate boom in 2008, there weren't that many $1 million-plus properties listed. Realtor-to-the-stars Jane Hoffman in Kelowna has just listed a 7.5-acre lakefront "legacy property" off Okanagan Mission's Lakeshore Road that is the most expensive residential listing ever, at just under $10 million.

Whether or not the owners will get that price is, of course, open to question.

Since March 2009, the rapid recovery of the Vancouver real estate market has been remarkable. However, urban and recreational real estate specialist Scott Brown of Colliers International in Vancouver believes any improvement in the market for recreational properties in B.C. will be modest.

Brown has over two decades of sales and marketing experience and has overseen a number of the most successful recreational projects in North America. He sees a wholesale realignment of the market segment taking place.

"The investment and end-user markets for recreational were severely impacted by the global recession. Since the end of 2007, sales absorption and pricing levels have been on a steady decline from record highs. In numerous cases last summer, project pricing had to be discounted 30 + per cent from peak levels in order to generate modest interest and achieve any sales volume at all. At the same time, a number of projects were postponed or cancelled outright and a number have fallen into the hands of the lenders/receivers and are now classified as distressed. Typically, these distressed projects are 60-80 per cent complete, but have exhausted all financing and have no meaningful pre-sales." says Brown.

"Using the 'boom years' of 2002 -2007 as a reference point for predicting future success is unrealistic for a developer." He anticipates that the realignment in prices that started last year will continue for the foreseeable future until excess inventory is absorbed.

As the Vancouver market continues to improve, Brown expects the recreational market to show signs of recovery. "There is definitely an end-user market for completed, affordable product ($300,000 -- $500,000) and absorption levels are expected to improve modestly over 2008/2009 levels. As well, there is a renewed interest in re-priced luxury offerings."

(prepared by Steven Threndyle/Vancouver Sun)