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 Jun 21, 2008 Okanagan real estate was as hot as a forest fire but appears expectations may have to be adjusted ‘‘I would say to the premier, it’s just about time to look at more roads for this area so we can continue to grow. And to start working on the next bridge.’’ — Bill Bennett to Premier Gordon Campbell, the occasion last month’s ribbon-cutting that opened the new five-lane William R. Bennett Bridge nce you cross the new bridge from Kelowna into Westbank, you see why the former premier is probably right to think that the explosive growth that the Okanagan has experienced will tie up traffic (again) in the not-too-distant future. Enormous billboards, not the symmetrical rows of vines or the glistening waters of Okanagan Lake, vie for the driver's attention: Most of these billboards are touting that virtues of purchasing real estate and living the Okanagan dream. A new condo listing website called redkey.ca lists more than 200 new housing projects from Sicamous and Mara Lake to the north all the way south to Osoyoos and the border. Even the vast number of names can get confusing and challenge the lexicography of developers and their marketing firms to stand out. Is it Baroloor Barona? Copper Hill or Copper Sky? Stonemark, Stonegate, Stonebridge or Stonewater? Mission Villas, Mission Lofts or Mission Meadows? Where are Mode, Glas, Cache, Kaleido, Azure, Mosaic and Verve? Isn't Yaletown in Vancouver? Is Merlot a wine varietal or a condo project? Didn't we pass a car that was called a Sitara? Reflecting a ‘‘perfect storm’’ of demographic trends such as equity rich babyboomers ready to retire, vacationing Albertans looking for a living space a bit more comfortable than the typical lakeside campground and empty-nester locals looking to downsize, the Okanagan boom comes in all sizes and shapes. Even the property-mad Brits and Aussies are discovering the Okanagan, purchasing luxury ski condos at Big White and Silver Star for skiing that champagne powder. On a personal note, our family moved to the Okanagan in 2002, and at that time it was a very different place. Western Star had just left town, there had been significant layoffs at Telus, and while some carpenters and building tradesmen lived in Kelowna, a lot of them commuted to Fort McMurray or the Lower Mainland. In fact, housing prices had stagnated for almost 10 years. In the past five years, however, real estate prices have been hotter than the Okanagan Mountain fire, doubling and, in some locations, almost tripling. Older motels are being bulldozed. Billboards touting new projects — some of which are still going through the approval process — are popping up years before completion. With prices in Kelowna cresting $500,000 for a detached home and $300,000 for an attached home, thequestion on many people’s minds right now is, has the easy money been made? A report in April from the Canadian Mortgage and Housing Corp. was interpreted by some people as asserting that the Okanagan might be very close to an oversupply situation, especially as more condo developments are approved. The author of the report was Paul Fabri, a market analyst with the national housing agency. In a recent interview, he left no doubt that an oversupply situation is possible. ‘‘The entire Okanagan region has been on a hot streak over the past four years, where the median price for resales has essentially doubled pretty much across the board,’’ he said in an interview. ‘‘This is due to many factors — retiring baby boomers, the enormous demand for recreational property, healthy job and population growth within the Okanagan and investor interest. ‘‘We’re coming off a record year for housing starts in the region, and the focus has been on multi-family units. “For 2008, we’re moderating our forecast for the region a bit due to general economic conditions such as the rise in energy prices, a stronger U.S. dollar that is making secondhome purchases there more attractive to Canadians, a softening of the Alberta residential real estate market and a general decrease in consumer confidence. ‘’Already this year, sales activity has dropped while listings have gone up. In fact listings for condominiums have doubled in the past 12 months. ‘‘People used to double-digit annual price increases just might have to adjust their expectations a bit. Though we haven't seen any condo projects in trouble, we do think that there is the potential for oversupply by the end of the year.†Developers could forestall that eventuality by not bringing to market projects for which they have approvals. (They would have to have deep pockets to carry the financing charges on their properties, however.) Fabri does not doubt that could happen. ‘‘ …some developers may pull back from building new projects due to higher construction costs and wait until supply eases. ‘‘It’s important to note, though, that this is still a strong market overall and the long-term outlook is still very good for the Okanagan.†Bert Chapman is the past president of the Okanagan Mainline Real Estate Board and he has some interesting opinions on where the market is heading. While it’s true that recreational property and residential sales to out of province purchasers are important, sales to Albertans still only count for 28 per cent of the market. In fact, half of the transactions in the Okanagan are generated by valley residents purchasing and selling property: retired households, for example, downsizing from attached residences to more affordable or more convenient attached residences. Chapman, a Premier Canadian Properties broker, is not bothered by talk of a real estate bubble in the Okanagan due to the record number of listings. We have seen that redkey.ca lists over 100 new projects for Kelowna and Westbank, and we know that there are a lot of new condo projects out there that are currently under construction. “But the fact is that if you wanted to move into a brand new condo next week, you might only have a couple of hundred places to choose from. “That situation will, of course, change as time goes on, but even when the inventory goes up, that will mean more and better choices for people coming from outside the region. “It wasn’t that long ago that people were turning away from the Okanagan because there wasn’t the selection of new homes and luxury housing that people wanted. Developers have stepped up and are really giving the market what they want.†Chapman also identifies market niches for investors that fly a bit below the radar, such as golf course properties at Quail Ridge that are being purchased for a combination of investment and personal use. “The Okanagan has a long golf season — from April until October — and suites in places such as The Pointe at Quail Ridge can be rented out on a short-stay basis or used by owners from out of town. ‘’The new University of British Columbia Okanagan is facing major housing challenges, and the golf course is located right next to the campus. So there is certainly the potential to rent to students in those months when you can’t golf.†Indeed, while the many realtors who have hung out their shingle in the Okanagan may despair about the number of listings, investors should take note: Kelowna’s apartment vacancy rate is close to zero. Indeed, it’s the l owest in British Columbia. Should prices cool off a bit, there is likely a large market of new buyers waiting to come in, Chapman concludes. “People will continue to move here because it’s a desirable place to live.†(Source: Vancouver Sun....prepared by Steven Threndyle/Kelowna reporter and editor) Go Back To The Market Updates Page Questions? No problem! For more information, please feel free to contact June Conway toll free at +1.888.657.7123. Of course, you could always just email June Here . |
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