Kelowna a magnet for investor consumers

The Seven Stones Winery near Cawston, BC, in the Similkameen Valley south of Kelowna. The property is currently for sale at an asking price of $8.7-million.Faith Wilson Realty Group Inc.

Kelowna is the fastest growing census metropolitan area in Canada, and it is also one of the few regions in BC where the share of empty or under-occupied dwellings has increased.

Kelowna grew to 222,162 people in 2021, a 14-per-cent increase within five years, according to new Census data released two weeks ago.

But the number of dwellings that were sitting empty or under-occupied is now at 7.3 per cent for Kelowna city, the highest rate of all communities over 100,000 people in BC – and a higher rate than in Vancouver. That’s a 39-per-cent increase over the number in the 2016 census. Dwellings not occupied by the usual residents in the census are units that are used as short-term rentals or part-time homes, or awaiting occupancy. Housing used by international students or temporary workers does not fall within the category.

In Vancouver, 7 percent of homes are either vacant or under-occupied, which is a decline from the previous census, said Andy Yan, director of Simon Fraser University’s city program. While Vancouver saw a drop in the number of vacant units, likely due to city and provincial taxes aimed at curbing empty homes, the Kelowna region was one of the few in BC to see an increase.

Nationwide, there are 1.3 million homes that are not occupied by the usual residents, or 8 percent of all homes, according to census analysis by urban planner and housing researcher Steve Pomeroy, of Focus Consulting.

Vancouver’s real estate and development communities are tapping into major growth occurring in Kelowna, BC’s version of Napa Valley, where people are increasingly seeking the area’s semi-arid summers.Faith Wilson Realty Group Inc.

Kelowna is subject to the province’s speculation and vacancy tax (SVT). A person is exempt if the home is their primary residence, or if the unit is rented for at least six months. The tax was intended to target foreign and domestic speculators. Foreign buyers are not as active in the Okanagan as they are in the Lower Mainland. As well, foreign owners and satellite families are charged a higher tax rate of 2 per cent, while Canadian citizens and permanent residents not in a satellite family are charged 0.5 per cent.

“Empty dwellings are the result of foreign ownership, vacation properties, investment properties and seasonally occupied dwellings,” Mr Yan said. “It’s important to remember that the speculation vacancy tax has different rates for foreign and Canadian owners. The SVT had a different impact on each region because of the mix of foreign or domestic investor and speculator. A tax of 2 per cent on $1-million for a typical Vancouver property is a lot different than 0.5 per cent of $500,000 for a property in Kelowna.

“That difference likely played a role in the number of empty dwellings.”

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Kelowna also has a high percentage of non-owner occupied units, which is an indicator of the secondary rental market, or mom-and-pop landlords. The percentage of homes that are non-owner occupied in the city of Kelowna is 25 percent and 23 percent for the region. Those figures are also getting closer to Vancouver, which is at 33 per cent of all homes.

The figures point toward an active investor market, buoyed in part by pandemic buying by Lower Mainland residents, those in the industry say. Vancouver’s real estate and development communities are tapping into that major growth occurring in Kelowna, BC’s version of Napa Valley, where people from the Lower Mainland, Alberta, Saskatchewan, Ontario, Europe and the US are increasingly seeking the area’s semi-arid summers. Many of them are purchasing homes as secondary properties, either for part-time use, or for future retirement.

Long-time Vancouver realtor Faith Wilson made her move into the Okanagan market a couple of years ago, and the Faith Wilson Realty Group Inc., part of Christie’s International Real Estate brand, will soon be running a commercial space in downtown Kelowna. It will be the firm’s second office outside of Vancouver. Ms. Wilson oversees a team of 35 agents and has a small office in Penticton, BC, as well.

“We have definitely noticed an increase in people moving from the Lower Mainland to the Okanagan. Certainly there is this influx from Alberta, and Toronto and the Ontario area, lots from there. Who are they? Different demographics. Some may think it’s downsizers, but that’s changed now. You have them for sure, but people are buying multiple homes, someone who wants a second or third home–you have those folks. And you get an interest in the Okanagan from a lifestyle perspective, from the younger generation now, who want to grow their families there.”

Current real estate trends have pointed to developers being more interested in the Okanagan than in the past.Child Development Group

Kelowna real estate marketer Shane Styles, president of Epic Real Estate Solutions, says his company has gone from two employees when it started a year and a half ago to 31 people today. Mr. Styles had been working in Vancouver and then relocated to Kelowna when the market there picked up. Epic has been around for 17 years and had downsized slightly due to the pandemic, but they’d only ever needed around five employees. That’s changed due in large part to the influx of Lower Mainland residents, the growth of Kelowna’s tech industry, and the University of BC presence in the downtown core, and the thousands of students that will be arriving.

Mr. Styles says his company has about 800 units coming online in the next five months, and that’s just his marketing firm. Of the 25,000 registrations of interest they’ve received, he estimates around 40 per cent are from the Lower Mainland and about 20 per cent are from Alberta. A few years ago, that ratio would have been flipped.

“People from Vancouver, Chilliwack, Winnipeg, Regina and Calgary want to get their foot in the door. They see a future for themselves, but they’re not quite there yet, so they make an investment, a future play to be in this market,” he said.

Developers are also more interested in the Okanagan than in the past.

“Five years ago, pretty much everybody was local. I would say today I feel 80 per cent of my development inquiries are from developers outside the market. A lot of eyes are on the Okanagan, and most of them know it well. They’ve been coming here with their families, and they just never made a real estate play because it wasn’t dynamic enough. You start to put up some 20-storey towers downtown and announce UBC is coming downtown, and that started to change the interest.

“The last inquiry was a guy who is from Calgary, does work in Phoenix. I said, ‘what is your interest in the Okanagan?’ He said he was intrigued by UBC coming downtown and so he bought four houses a block away. He’ll do a 65-unit, six-storey wood frame project, and there are a dozen of those happenings within a kilometer of any direction I look from my office.”

Long-time Vancouver developers Cressey pre-sold out 127 high-end units in a six-storey beachfront development in the Kelowna neighborhood of Pandosy, scheduled to complete in two years.

Kelowna has a high percentage of non-owner occupied units. The percentage of homes that are non-owner occupied in the city of Kelowna is 25 percent and 23 percent for the region.Child Development Group

And long-time Vancouver developer Rob Chetner has been expanding into the Kelowna market. His Kind Development Group has sold 99 of 100 units in phase 1 of its Lakeview Village overlooking Lake Okanagan in West Kelowna. This summer Mr. Chetner will launch sales of 122 units in the three or four phase condo project. Most buyers are from the Lower Mainland and about 15 per cent are investors, he estimates.

“We will probably continue to draw people from the Lower Mainland. Whether they are full timers or part timers, it’s hard to say at this point.”

He also redeveloped a boutique shopping mall across the street, one of four projects he has in Kelowna, with a fifth on the way and two more after that.

“I have my eye on a few others,” he says. “I’m definitely doing a lot in Kelowna. I’d like to do more in Vancouver, but there’s the cost of admission combined with the bureaucracy. I could call the mayor in West Kelowna right now. They’re accessible, and it’s easier to navigate and the cost is more bite sized, as well.”

He estimates that land assembly around Vancouver’s Cambie Street costs about $20 to $25 million for a third of an acre, while that amount buys you five or six acres in Kelowna.

“That offers developers a much different perspective and it gives purchasers a lower price, and a different lifestyle. That’s how we make it affordable.”

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