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!