South Okanagan Real Estate update

April 2018

Positive market forces

Amidst all the changes for our industry & consumers at large, the Okanagan Valley continues to have strong market dynamics. Tight supply has led to rising home prices over the last year (vast majority), with incredible gains made over the previous five years.

The supply of new homes is growing. Although modestly, the availability of newly constructed homes is providing a much better mix for potential homeowners to consider in the South Okanagan. This is a significant improvement and we are very thankful for the builders out there, who continue to develop the supply of homes we need. Coupled with this, the rising value of existing inventory of older homes has encouraged owners to renovate & upgrade. This is great for the longevity of the housing stock. Better condition & quality for the consumer is always a win.

Even with recent changes, interest rates are still at benign levels of around 3.0% see chart and most can qualify for their desired purchase amount. Some dreams were indeed curtailed by mortgage rule changes of January 1. This said, banks continue to have an appetite for residential mortgages bolstered by the more modest qualification environment.

The South Okanagan is a provincial and regional bright spot. Given the latest policy changes (speculation tax) our region will benefit from its exclusion from the tax. Kelowna, our superstar neighbour of relocation & retirement has been caught in the NDP’s tax zone. Those looking to relocate to the Okanagan will surely see the benefits of buying in the South (Details of the tax here).

We also continue to see buyers cashing in on their Vancouver property and relocating to the Okanagan Valley. I would expect this trend to continue for some time as the differential in prices remain significant.

Some Risks

Liberal & NDP governments seem to be tripping over themselves to whom can curb Canada’s growth the fastest. Ill conceived new taxes (most recently the speculation tax; changes to small business taxes & the foreign buyers tax) are having a policy driven effect on the BC economy & real estate market. Fundamentals suggest that the will of the consumer is still strong, but we do expect these policy initiatives to moderate expectations at some point. Some in government would say “it’s working” and others would say, “be careful what you wish for”…

All of these factors aside, a significant rate of monetary expansion is having a predictable effect, as the cash must find somewhere to go. See this illustrative chart… This does however pose an inflation risk. Given this, and the more competitive bond market globally, we will likely see rate increases ahead.

Trudeau’s government has adopted a hostility towards foreign investment that beggars belief. With a 26% Decline in foreign direct investment, I am concerned at what motivations the Liberals are taking off the table for would be investors. The decision to meddle in markets can have a long tail and last years if not decades… we can only hope the leading edge of investment confidence is not eroded further by our governments.

Moving Motivations

Irrespective of what the market appears to be doing at any given time, our lives are dynamic and constantly changing. You may need to sell a property that you once thought you’d never part with to finance a new venture or goal in life. For others, the motivation is a growing family. Sometimes, it’s a move to downsize & be closer to loved ones and grandkids. Whatever the occasion, let me know how I can be of service to you! I am always available to talk, even when it’s “just an idea”, it may be helpful to have that conversation!


Thanks for your continued loyalty & I look forward to hearing from you!


The Numbers 

Sales figures through January and February were dislocated & would have led to more confusion than clarity, So I waited for the March statistics as they became much more reflective of what we are seeing ‘on the ground’ in aggregate. Below are the latest Yr-over-Yr, YTD figures. 


Summerland YTD 

Unchanged Single family home price at $601,387

Unchanged Condo/Townhome price at $298,944

Down -1.3% Total residential price at $492,125

Down -28% Sales Volume at $19,684,982

Down -20% Current Listing Inventory at 63


Penticton YTD

Up 7.1% Single family home price at 549,402

Up 11.8% Condo/Townhome price at $318,682

Up 10.2% Total residential price at $410,241

Up 5.8% Sales Volume at $100,098,816

Up 18.4% Current Listing Inventory at 289


South Okanagan Total YTD

Up 1.3% Single family home price at $490,823

Up 13.1% Condo/Townhome price at $310,156

Up 6.1% Total residential price at 396,971

Up 1.5% Sales Volume at $181,812,921

Unchanged Current Listing Inventory at 833   (Near historic lows) we need more listings!


Haleakala National Park, Maui (pictured above) A favourite experience (of mine 😉 while on winter holiday with Becky this year. I was graciously allowed to do a ‘bucket list’ ride from Paia to the top of the crater. 57km and 10,000 vertical feet of climbing! If you’re looking for a thin air challenge, this is it!

510 – 250 Marina Way
Enjoy the beautiful views of Okanagan lake from this spacious, east facing, 2 bedroom 2 bathroom condo. Lakeview Terrace offers its residents some of the most unique architecture in the Okanagan.

13014 Cartwright Avenue

Estate zoned 7 acre property, ideally situated within 15-minute walking distance to downtown Summerland. This is a once in a lifetime opportunity, don’t miss it!

6788 Indian Rock Road

Naramata. 2,900 sqft 4 bed 4 bath home on 1.30 acres nestled in a stunning rock canyon with a beautiful year round creek for your peace & rejuvenation.

3 new mortgage rule changes. January 1, 2018

OSFI (The Office of the Superintendent of Financial Institutions) has implemented 3 new mortgage rule changes. January 1, 2018


Qualifying rate stress test to all uninsured mortgages

Uninsured mortgage consumers must now qualify using a new minimum qualifying rate. The rate will be the greater of the five-year benchmark rate published by the Bank of Canada OR the lender contractual mortgage rate +2.0%.

How does this affect the mortgage consumer with a down payment/equityof 20% or more?
The biggest impact will be on the amount for which the home buyer/owner will be able to qualify. Previously, the home buyer/owner qualified at the contract rate offered by the lender. While the actual mortgage payment will still be paid at the contract rate, a higher calculation will be used for qualification purposes.

For example:

Do I still have the option to refinance my home?
Yes, home owners will still have the ability to refinance up to 80% of the value of their property. You will have to pass the same stress test which is the higher of the BoC five-year benchmark rate (currently 4.89%) OR the contract rate from the lender plus 2%.


Lenders will be required to enhance their loan-to-value (LTV) measurement and limits to ensure risk responsiveness

Mortgage lenders (excluding credit unions and private lenders) must establish and adhere to appropriate LTV ratio limits that are reflective of risk and updated as housing markets and the economic environment evolve. We are awaiting more details on this policy from lenders. As we have new information, we will update this document.

What does this mean?
OSFI directs lenders (excluding credit unions and private lenders) to have internal risk management protocols in higher priced markets (sometimes called “hot real estate markets” like Toronto and Vancouver). This is a continuation of a policy already in place. Many mortgage lenders have been following the principles of the policy for the last 10 to 12 months.


Restrictions will be placed on certain lending arrangements that are designed, or appear designed to avoid LTV limits

Mortgage lenders (excluding credit unions and private lenders) are prohibited from arranging with another lender: a mortgage, or a combination of a mortgage and other lending products, in any form that circumvents the institution’s maximum LTV ratio or other limits in its residential mortgage underwriting policy, or any requirements established by law. This is often referred to as “bundling” or “bundle partnership”.

What does this mean?
For example: a consumer applies for a mortgage with an 80% LTV and the lender can only approve 65%. The lender then partners with a second lender for the additional 15%. The original lender then “bundles” the 15% LTV mortgage with the original 65% mortgage to form the complete 80% LTV loan. This is no longer permitted as per OSFI.

Chart - New Mortgage Rules 2018

Be Careful What You Wish For


Market Intelligence BCREA Economics April 4, 2018

Careful What You Wish For – The Economic Fallout of Housing Price Shocks

The desire of some well-meaning British Columbians for government to drive down the price of homes through demand-side policy may sound practical at first blush. However, when you consider the broad and deep economic toll that a negative shock to home prices would exact on both homeowners and renters, it quickly becomes apparent that such an approach is at best, a mug’s game. BCREA Economics analysis* shows that even a relatively modest negative price shock will produce significant consequences to the BC economy.

Nearly 70 per cent of British Columbian households own their home. A relatively minor 10 per cent negative shock to home prices would extinguish $90 billion of their wealth, or $70,000 of the average homeowner’s equity. While some may see this as a paper loss, it will have a significant impact on the economy, as declining household wealth reins in consumer spending. Retail sales would suffer, with an estimated $1.8 billion in forgone revenue in the first year after the shock.

Home construction activity would fall dramatically. Home builders would cut back production 25 per cent; that’s 10,000 fewer housing starts in the first year alone. A negative price shock would markedly slow the expansion of the housing stock, creating even more critical housing supply problems down the road.

Across the economy, a negative home price shock will slow growth. Tens of thousands of jobs will be forfeited. The unemployment rate will shoot up. A 10 per cent negative price shock will slow real GDP growth to 1.5 per cent from a baseline of 2.7 per cent. That’s $3 billion in lost activity. If home prices fell 35 per cent, a level some activists are championing, the BC economy would collapse into recession. The average home owner would have lost $245,000 in equity, housing starts would fall by half, 64,000 jobs would be forfeited – sending the unemployment rate to 7.5 per cent with $4.4 billion in forgone retail sales and a colossal $8 billion loss to GDP in the first year.

This analysis does not account for the negative impact on provincial tax revenues, expanding deficits, ballooning debt and credit downgrade risks.

Think seriously about what you want when asking the government to intervene in a market system. You are playing with fire. Loss of GDP has an extremely long tail of destruction.

Poll: Canadian’s home buying intentions highest in 8 years

Despite tighter mortgage lending rules, the number Canadians planning to buy a home has hit the highest level since 2010, according to a new RBC poll.

The annual Home Ownership Poll, released Tuesday, revealed 32 per cent of Canadians say they are likely buy a home within the next two years.

Millennials (those aged 18 to 34) report the highest home-buying intentions, with half of those surveyed expressing plans to buy a home in the next couple of years, as their worries around employment prospects and the state of the economy subside.

The majority (84 per cent) of young Canadians said they think buying a home is a “very good” or “good” investment. And nearly one in 10 respondents in this age group even said they would buy a home without seeing it in person.

However, only about 40 per cent of respondents said they are aware of the new stress test rules that took effect in January. The majority (55 per cent) admitted the measures are affecting their home-buying decision.

“Canadians continue to feel optimistic about getting into the housing market despite changes in government regulations,” Nicole Wells, vice president of home equity financing at RBC, said in a release. “They’re taking a more informed journey to home ownership by starting with affordability.”

At the same time, more Canadians said they are somewhat concerned about interest rate increases (61 per cent), a 10 per cent jump from last year’s survey. More than one third (35 per cent) said they are contemplating purchasing a home sooner because of the low-interest-rate environment.

When it comes to making a down payment, 35 per cent of Canadians said they’d be turning to family for help, with almost an equal number (36 per cent) planning to use their own savings.

“I think part of what you’re seeing now is this sort of tug-of-war,” Kash Pashootan, CEO and chief investment officer of First Avenue Investment Counsel, said in an interview with BNN. “On one side, you have the potential homebuyer feeling pretty good that prices have softened somewhat. We’re not seeing the same level of bidding wars we saw last year.”

“The other side of the equation is of course what we’ve seen with tighter rules around what banks will lend,” he added. “It will be interesting to see where the dust settles.”