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Hot real estate market in Penticton could be in for cool-off
Bankers have mixed opinions about how changes to Canada’s mortgage insurance system will affect the surging real estate market in the South Okanagan.
Earlier this month, the Canada Mortgage and Housing Corporation told lenders it would begin rationing the room it has left under a cap that limits the value of mortgage-backed securities it will insure against default.
“The cap may raise the cost of funds for some lenders, primarily banks. In turn, they may pass along those costs to borrowers in the form of higher rates or fees,” Valley First Credit Union vice-president of credit Jim Lamond said in a statement.
Possible mortgage rate increases could prompt people with short-term rate guarantees to begin shopping in earnest and “spur a round of activity in the market to buy now before rates go up,” Lamond said.
“Any fee or rate increase would be tempered by competition and would likely be modest,” he added.
Prospera Credit Union vice-president of treasury Michael Kerdachi doesn’t agree with some analysts who suggested the new limits were designed by the federal government to cool off Canada’s housing market.
“This is a very small, technical detail of the program,” Kerdachi said. “To try to then correlate that to slowing down the mortgage market I would see as a very difficult piece.”
Kerdachi doesn’t think the Crown corporation’s limit on lenders will necessarily drive up mortgage rates.
“We’ve seen a fairly significant (rate) increase in the last month here,” he said.
“I don’t think there’s a lot more to come.”
Judy Klassen, president of the South Okanagan Real Estate Board, said speculation about where mortgage rates are headed is still “just best guesses.”
“I haven’t heard anything from any of the banks saying they’re definitely going to be raising their rates,” said the Princeton realtor.
“It still is a bit of a buyer’s market in our area, so I think our pricing should probably stay pretty flat.”
But statistics show it’s also been a good summer for sellers.
According to figures compiled by the real estate board, sales of residential properties in South Okanagan totalled $52.6 million in July, up from $35.6 million the same month a year earlier.
The average selling price for single-family homes increased by $83,000 to $408,000.
In Penticton alone, residential properties worth $26.6 million changed hands in July, nearly double the total of $13.9 million during the same month a year ago.
The average selling price for single-family homes was up by $114,000 to $441,600.
Residential construction activity is also on the rise. In July, the City of Penticton issued residential building permits for construction valued at $3.4 million, up from $1.4 million a year earlier.
However, the value of all building permits issued through July totalled $23.6 million, down from $32.4 million during the same period in 2012, led by a sharp decrease in commercial activity.
Anthony Haddad, the city’s director of development services, noted the 2012 commercial numbers were pushed up by major projects such as the new Landmark Cinemas 7 theatre and the Real Canadian Superstore conversion.