The U.S. invited the Okanagan to join the recession but it declined. The Okanagan continues to surprise critics with its resilient market. This month a new record was set for the most expensive non-waterfront home to sell. The house sold for $7,200,000. The record was shattered the very next day with another non-waterfront home selling for $7,400,000. The second home housing market at the high end is flourishing. Demand for high end real estate, especially waterfront, is huge. Single family homes and townhouse prices continue to rise. The only sector that is starting to take a hit is the condo market and it has nothing to do with the U.S. recession. It has to do with supply and demand and the fact that too many condos were released for sale at the same time. While I will admit the days of seeing twenty-five per cent price increases in a single year are thing of the past, we are still seeing respectable price increases (this year an increase of 8-9% is expected). Low interest rates, record-high employment rates and rising incomes are stabilizing the Okanagan market and facilitating continued price increases.
What draws buyers into the area?
If you want to make money in the real estate game, buy real estate where the wealthy like to play! The Okanagan is a popular year-round playground for some of Canada’s most affluent families, wealthy Americans and Europeans looking for more remote luxury destinations. With more sunshine per year than any other region in Canada, golf courses second to none and endless recreational activities, it is easy to see why the market continues to attract new buyers each year. Where else can you snowboard, play a round of golf, horseback ride, tour a historic side and visit a winery all in one day?
There are 3 main types of buyers in Kelowna: young families, retirees, and investors/second home owners.
Young families flock to the region to take advantage of the great weather, spectacular beauty, agricultural abundance and recreational opportunities. The Okanagan promotes a healthy environment for kids with programs like Kickstart, a community driven initiative focused on creating an awareness of the benefits of physical activity. Kelowna Secondary school in Central Okanagan ranked #2 out of 178 schools in a ranking on how effectively the schools used teaching and counselling techniques that enabled both boys and girls to succeed.
38% of people in B.C. and Alberta surveyed said they wanted to retire to the Okanagan. The warm dry weather combined with health care are the two main draws. Sure Palm Springs and Florida have warmer weather but they don’t have the government health care with is crucial to most retirees. Mission Villas, a new development in the Upper Mission, allows buyers to purchase their home in an assisted care community. The owner then pays a monthly fee for the assisted care services. In the past buyers who needed care in the area could only rent a unit in an assisted care facility. With Mission Villas the buyer doesn’t lose money on rent. They own their home which they can sell later for a profit.
Even with the price increases slowing down, the Okanagan is still a great investment. I had a client recently purchase an investment home in Kelowna. His mortgage on the house is $1450 and his rental income is $1800. Kelowna currently boasts a phenomenal zero rental vacancy rate (investors looks for a 3% vacancy rate or less). With average rooms renting for $400 to $600 per month it is easy for investors to find investment properties that will “carry themselves”. Remember the 1 per cent rule – the monthly payments of 1 per cent of the purchase price will service a 100 per cent financed property and cash flow. With the population expected to double over the next 10 years and mortgage brokers toughen their lending requirements, investors will have their pick of renters. And getting here for international buyers is going to get even easier when the $150 million upgrade on the Kelowna International Airport is finished allowing the airport handle direct international flights from U.K., Germany, U.S. and even China.
Where do you see the market in the near future?
The Okanagan will continue to see growth in years to come. As people continue to move here, growth can only go two ways, up and out. That means investors are going to be buying large chunks of land outside of town. Smart people buy land in the direction where growth is headed. As hockey legend Wayne Gretzky says “skate to where you think the puck is going to be.” The Okanagan is going to see more and more communities pop up on the outskirts of town.
The other growth is straight up in the form of duplexes, townhouses and sky rises. Look at older areas of town like Kelowna North where all the original war-time homes are. Most of this area is already zoned RU6 which allows for the development of duplexes and second carriage homes (great for mortgage helpers). As the land becomes more and more valuable these old homes are going to be torn down to build condo towers. Anything close to the lake is an ideal choice.
For more information on the Okanagan market please contact:
MacDonald Realty Kelowna