The 2021 year is one the Kelowna real estate industry hopes will never end.
In dramatic and unexpected fashion, the Okanagan real estate boom has taken a wild upswing dating back to early last fall, despite the impact of COVID-19, a boom cycle some experts say could extend for the rest of the decade.
While those selling land and housing are cashing in, affordability has reached a crisis point.
“I think when we look back at 2021 in the real estate industry, we are going to say it was a good time, but maybe the party ended too fast,” said Scott Brown, CEO of Epic Real Estate Solutions/Fifth Avenue.
Brown was one of three guest speakers for the monthly luncheon Zoom forum hosted by the Okanagan branch of the Urban Development Institute.
Joining Brown were Marshall McAnerney, principal/co-founder of HM Commercial Group, and Courtney Deshayes, a licensed property manager with Associated Property Management.
Speaking to the residential sales market, Brown said condos, single-family detached, townhomes and high-rise housing categories have all seen sales escalate dating back to last September.
“We have had what I would call a hot winter in housing sales and that suggests the summer will double what we saw in 2020,” said Brown, noting unsold inventory has dropped 50 per cent compared to six months ago.
Brown suggested the pent-up buying demand across the Okanagan, spotlighted particularly in Kelowna, is driven by people moving to the valley instead of people moving around within a given community.
He says the buyer market is drawn from across Canada, people making a lifestyle choice to live in the Okanagan made more feasible by the ability to work at home, setting off an in-country migration that is expected to be further buttressed by a new wave of immigration from outside Canada settling here.
“That exodus of people from the larger urban centres like Vancouver started several years ago, and we are seeing that reflected both in the Greater Victoria and Kelowna regions where the real estate market has exploded,” he said.
“In the Kelowna region, younger people coming here to work remotely or find new jobs, the 55-plus crowd still working but again seeing the potential to work remotely because of what COVID has imposed on us, and people retiring are still coming here.
“And when you think about whether you want to deal with a highway or a ferry, it puts Kelowna in an enviable position.”
Deshayes said of 10 recent rental agreements she oversaw, only one was a Kelowna person relocating, the rest coming from Vancouver, Toronto and Alberta.
Like residential home sales, where demand exceeds supply, Deshayes says she sees those same characteristics play out in the rental market – great news for investors but bad news for renters seeing rental rates spike and availability reduced.
“In some cases, we are not even advertising rental vacancies. Either by word of mouth or through friends, vacancies are filled quickly,” she said.
She said Central Kelowna statistics reveal rental rates for condos have jumped from $1,500 to $2,450; main upstairs of a house from $1,600 to $2,300; and basement suites $1,400 to $2,000 since 2018.
“It is very tough out there for tenants right now,” she admitted. “But there is more inventory coming on the market in the months ahead, so I feel good about that. It is a hot time for the market right now.”
Addressing the commercial/industrial side of the industry, McAnerney summed it up this way: “What a difference a year makes.”
Available land has become a hot commodity, entertaining multiple offers for development across the valley, attracting the interest of Lower Mainland and Alberta developers.
Commercial space leasing has also seen a surprising resurgence despite the economic impact of COVID, trending particularly in the food and beverage areas and some personal services.
“The leasing market is still on fire despite COVID, but the office leasing category has been the slowest to rebound,” McAnerney said.
“Larger corporations have shown a hesitancy to lock into long-term leasing deals. There is greater interest in leases under 10 years due to the uncertainty around design space for physical distancing.”
Brown believes the ‘canary in the coal mine’ scenarios which might alter the current market boom include a sudden rise in the mortgage default rate or the federal government using a regulatory hammer to curb an over-heated market as was done in 2016 in response to the rising mortgage debt ratio for homeowners.
On the rental side, Deshayes said the rental crunch driving up rental rates will continue to make it more difficult for affordable rental options.
“A lot of people will be left with the option of moving out of the city and go somewhere else cheaper…the housing crunch is what worries me,” she acknowledged.