Last updated November 5, 2018
Fewer people are buying homes in the Central Okanagan and prices have plateaued.
The number of homes sold across Canada has dropped significantly and prices have generally flattened out. Vancouver house buyers have bought half as many homes in 2018 as they did in 2016. Kelowna appears to be one of the better performing markets even thought his year saw activity well below prior years.
Activity in the condo market is not as depressed as houses, but still trending below previous years.
People aren’t buying homes like they used to and that will make life more difficult for sellers.
Condo prices have flattened out since peaking in Spring of 2018. The average price of a Central Okanagan condo peaked at $364,000 in March and the Median price peaked in April at 340,000. They have since dropped to 348,000 and 333,000 respectively, down about 4 to 5 percent.
Tight supply appears to be the key driver holding prices up in the face of higher interest rates and new mortgage rules that have reduced affordability. The net effect is that only the wealthiest buyers are still in the market. Sales are down because ~20% of potential home buyers have been priced out of the market. If there were more supply, then everyone would have a chance to buy a home. Luckily supply is trending upward.
So far this year, 1,200 condos were bought and unsold condos are starting to pile up while at the same time construction has begun on 1,800 more condos. 2019 may well see a balanced or buyer’s market that will be a moderating influence on condo prices. Next year will be a good year for buyers.
The average condo price is above the median price and that implies that more luxury or newer apartments are being sold. Perhaps people flipping newly built condos?
People buying condos intending to rent them to students them are taking on some risk since the BC Government is planning to fund construction of more subsidized student housing on university campuses like UBC Okanagan. The risk is somewhat mitigated because those student residences will take several years to be built.
As things stand, the condo market has entered balanced territory with over 5 months of inventory for sale. That will allow buyers and sellers to negotiate prices on an equal footing.
Kelowna house prices are ending the year where they began. In comparison, City of Vancouver house prices have dropped 5 to 10 percent. In January 2016, a average priced Kelowna house could be bought for $530,000, but since then prices have risen 36% to the current average price of $725,000; beyond the reach of many potential buyers.
The flattening of prices is partly caused by higher interest rates and mortgage rules, but it is also the result of prices outpacing people’s ability to pay.
As a result, homes are starting to pile up on the market and Kelowna appears to be headed toward a balanced market for single family houses.
In the real estate industry, there are metrics used to indicate when buyers and sellers have more negotiating power. As a rule-of-thumb, less than 5 months of inventory (i.e., homes for sale) means it is a “Sellers Market” and the seller has the upper hand in a price negotiation. When there’s more than 9 months of inventory for sale, it’s a “Buyers Market” and buyers have more negotiating power. The theory is that buyers know that it could take over 9 months to sell the home, so the seller should probably drop the price to make sure the buyer in front of them purchases the home, or they could potentially be having open houses for 9 more months.
There is still a lot of uncertainty in real estate these days. The markets for both houses and condos in Kelowna and the Central Okanagan are trending toward a balanced position where buyers and sellers can negotiate on an equal footing. If you are going to try to time the market, then this is a time for sellers to pull the trigger since it appears conditions are set to soften further. For buyers, it seems prudent to wait and see.
If your family is growing and you need a larger space, simply a place to call your own, or you believe timing the market is pointless, then take advantage of these tips to reduce your risk.
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