Has demand waned in the Kelowna real estate market this year?
This is a common question that is being asked in both Kelowna and the broader Canadian housing market. With inventories limited and interest rates on the rise, some prospective homebuyers may be taking a break from shopping the market. Perhaps they are waiting for further price declines, or maybe they are still saving enough of a down payment after the post-pandemic surge in prices.
Whatever the case may be, sales have slumped for the three main property categories in the Kelowna housing sector: single-family homes, townhomes, and condominiums.
If demand is falling, are prices responding by dropping as well? Not quite.
A Look at the Kelowna Real Estate Market
The Kelowna real estate market witnessed mixed conditions in May as the broader British Columbia housing sector stabilizes and moves on from the pandemic-induced boom.
Last month, the average sales price for single-family homes rose nine per cent year-over-year to $1,165,797. However, the average sales price tumbled nine per cent on a month-over-month basis.
Residential property sales for single-family homes plunged on an annualized basis of 32 percent, totaling 265 units. On a per-month trendline, sales volumes dropped six per cent to 265.
Active residential listings of single-family properties advanced 51 per cent, with Kelowna seeing 1,079 units on the market. This is also a 24 per cent month-over-month gain.
The market for townhomes moderated during the peak of the busy spring buying season. The average sales price for a townhome dipped one per cent on a month-over-month basis, to $768,155, while sales activity slipped four per cent to 91 units. Active listings for townhomes climbed 31 per cent year-over-year and 20 per cent month-over-month to 214 units.
Condominiums have held steady over the last month. The average sales price for an apartment fell five per cent month-over-month to $518,637. Sales slid two per cent as the Kelowna real estate market experienced a two per cent decline. The number of active listings for condos jumped 8 per cent, with 306 units, although there was a ten per cent decrease from the same time a year ago.
The other positive development is that new housing construction activity was robust in April. According to Canada Mortgage and Housing Corporation (CMHC), housing starts soared nearly 116 per cent from the same period a year ago, totaling 285 units. Housing starts have fallen behind in the first four months of 2022, coming in at 636 units compared to 721 in the January-to-April span of 2021.
‘2022 is a Very, Very Different Market’
Will British Columbia slip into a housing crisis this year?
BC Real Estate Association (BCREA) chief economist Brendan Ogmundson was forthright in his expectation of the state of the overall real estate market?
“2022 is a very, very different market,” he told an audience at the Kelowna Chamber of Commerce last month. “The economy has shifted. Inflation is back from the dead (currently 6.8% when it should be 2%), home prices are unaffordable, gas is $2.08 a liter, and food prices are up 10%.”
As mortgage rates spike and inflation accelerates, home sales will likely decline as much as 35 per cent over the next two years, he prognosticates. And yet, prices are not falling, he noted. The reason? Low inventory levels.
Still, no matter what happens, if you plan to acquire a home and live in it for at least the next five years, “anytime is a good time to buy because the housing market always finds a way to stabilize itself and eventually go up. ”
He reiterated the clarion call for more housing supply in Kelowna and the rest of the province.
“BC needs to build more homes, faster,” he said.
“About 70,000 units are under construction in BC, but we probably need twice that,” Ogmundson stated. “Developers have to have incentives to build. Municipalities take way too long to issue permits for new construction, and NIMBY is everywhere, so you can’t build where you need to build. Density is part of the solution, so prices can stabilize as people have more options.”
In the end, Kelowna continues to be a seller’s market, with the average residential sales price forecast to climb by nine per cent this year, according to the 2022 Canadian Housing Outlook Report.
But data suggest that there may be some rebalancing occurring within the different property types:
- Single-Family Homes: Four months of inventory
- Townhomes: Two months of inventory
- Condos: Two months of inventory
With demand seemingly waning, perhaps this is good news for those seeking to enter the housing market.
