faithwilson | Christie’s International Real Estate’s exclusive and comprehensive Market Analyses August 2021 have arrived for both the South Okanagan and the Combined Okanagan areas.
Kelowna, indeed the entire Okanagan, has not seen a residential real estate market to match what has taken place since May of 2020.
Eight months into this year, the region has already seen record-breaking sales and price increases, with total sales up 71.2% year-over-year in the Central Okanagan, anchored by Kelowna, and up 62.3% in the South Okanagan, led by a triple-digit increases in Osoyoos, Okanagan Falls and Naramata. And this was in despite of an August sales slowdown, month-over-month, due to a severe shortage of listings, according to the Association of Interior Realtors.
Total sales in the Interior were up 80% annually through the first seven months of 2021, to 9,281 transactions, while total listings plunged by 48% in the same period, to 2,687 homes. The average composite home price increased 26.6% year-over-year to $685,929 as of August 1.
Faithwilson, which has offices in the B.C Interior regions of Central and Southern Okanagan, is pleased to introduce this dynamic market to our monthly coverage of B.C.’s residential marketplace.
The Interior market covers a huge swath of B.C., from Revelstoke south to the U.S. border, east to Rock Creek and west to Eastgate Manning Park on the Lower Mainland’s eastern border. Our report includes Kelowna, the second-largest B.C. city outside of Metro Vancouver, Vernon and Shuswap in the North and east Okanagan and Penticton, Osoyoos and Oliver in the south, as well as smaller towns and villages, many of them lakefront communities.
Highlights of this report
- The best immediate deal for investors is the Okanagan condominium market, where we expect a breakout price increase in 2021 and a further tightening of rentals.
- The best long-horizon play for detached house buyers is in the north end of Kelowna, near the waterfront site of a closed sawmill where, in a July statement, the City of Kelowna confirmed it is planning, with investors, a Yaletown-type conversion from industrial to a “live-work-play” zone of mixed-use development.
- The best land investment play in Kelowna is not in the centre of the city – where major players have bought and are developing serviced sites at a rapid pace – but in the suburban fringe.
- It is still possible to scoop up rental-ready houses on lakeview lots for less than $550,000 in the South Okanagan.
- The lowest average price for a waterfront house is in the Shuswap Lake-Revelstoke region, at $851,613.
Kelowna & Central Okanagan
There is a severe shortage of homes listed for sale in the Central Okanagan, with listings down 51% in August, to 1,143 active listings, compared to August 2020. Kelowna is the dominant market, with a population of 143,000 compared to a total Central Okanagan Regional District population of 194,000.
Detached houses: Investors and other buyers of single-detached buyers have been active in Kelowna, particularly since 2016 when the city rezoned 750 standard-size single-family lots to in the central area to promote higher-density, allowing up to four homes (under RU-7 zoning) on each lot in some neighbourhoods. The zoning has since been expanded to other neighbourhoods.
This higher-density zoning, combined with a rush of buyers since the onset of the pandemic, has driven Kelowna average detached house prices to just over $1 million as of August 2021, up 24.2% from a year earlier.
The average price for a waterfront detached house in August was $2.08 million, down 16.7% from a year earlier. This price drop likely relates to a 64% drop in waterfront listings this year, with total active listings down to just three properties this August, two of which sold.
An emerging area to watch is the North End of Kelowna, which includes the 38-acre waterfront site of a former sawmill thar closed permanently last year. In July, the City of Kelowna confirmed it is working with the new owner of the site on a comprehensive higher-density plan for the north end, which currently has 800 homes, mostly on detached lots. Detached houses in the North End start at around $800,000, but the neighbouring – and booming – Clement area is already zoned RU-7 allowing up to four housing units on larger detached-housing lots. We suspect that once the official community plan is released, the North End of Kelowna, which is hemmed between Knox Mountain, Okanagan Lake and the high-rise developments downtown, will be among the hottest housing markets in British Columbia.
Condominiums: Kelowna is seeing rapid development of new condominiums in the centre of the city. These high-end new units are popular, even with prices cresting to $920 per square foot. As of August 1, there 543 new condos under construction, including 240 that started this year, but developers report that pre-sales of the new units is very strong. One revised downtown lakefront development by a major Vancouver-based developer reported 200 buyer registrations for the 120 condos offered after just two days of marketing this summer. Many of the new units are being purchased by investors, attracted by a very low rental vacancy rate and the allowance of rentals and even short-term rentals in the new condo projects. Despite the rapid construction – which includes a condo tower that will be the tallest between Surrey and Calgary – the new strata units will likely not be enough to satisfy buyer demand.
In August there were just 171 existing condos listed for sale, down 21.2% from August 2020, while year-over-year sales increased 14.3% to 146 units. Condos, in fact were the only housing sector reporting a sales increase in August, a clue to where demand is heading.
We believe resale condos in Kelowna remain a good buy for both investors and owner-occupiers. The average condo price is now $447,300, up 20.8% from a year ago, but the low inventory will likely drive that price higher as travel and immigration restrictions lift in the months ahead. Also, the expansion of the University of B.C. Okanagan campus in downtown Kelowna will increase demand for condos and condo rentals in the city.
Kelowna has one of the fastest-growing populations in Canada, with a projected 180,000 residents by 2040, yet it remains a small city by Vancouver standards. A condo owner anywhere in Kelowna is mere minutes from the beaches of Okanagan Lake or the revised and simply beautiful downtown.
Townhouses: The Kelowna housing shortage is most acute in the popular townhouse sector, as strata developers, as in Vancouver, prefer to build higher-density condo apartments on the increasingly expensive Kelowna land. In the first eight months of this year, 870 townhouses sold, up 53% from the same period in 2020. But with a sales-to-listing ratio of 100%, there were only 143 total listings for townhouses on the entire Central Okanagan market as of August, down 60.3% from August 2020. The average price of a Kelowna townhouse reflects the demand, rising nearly 18% from a year earlier to $686,626. The supply will remain low: there were just 387 new townhouses under construction as of August.
Land: Developers and investors from Vancouver, the Prairie provinces and Ontario have been buying fully-serviced ‘shovel ready’ development land in central Kelowna over the past two years, with the result that land prices have skyrocketed. A 1.25-acre multi-family development site downtown is currently listed at $12 million and a 1.4-acre site downtown recently sold, after multiple bids, for $8.1 million. The City of Kelowna is asking $5.9 million for a total of 2.4 acres along Harvey Street – the city’s main street – for a mixed-use residential/commercial development.
Kelowna land prices fall sharply, however, once you get into the suburban fringe. Patient investors can find large parcels land within the city but under rural agriculture zoning (but not in the restrictive Agricultural Land Reserve) from $30,000 to $50,000 per acre.
Vernon & the North Okanagan
Vernon: The largest city in the North Okanagan, Vernon has a stable housing market with a moderate sales pace and prices compared to the Kelowna area or the South Okanagan. The average detached house price in August was $685,000, up 6.4% from a year earlier. Waterfront houses, however, average $2.17 million, up 12.6%, year-over-year. Condo apartments are also relatively affordable, at an average price of $285,300 in August, up 8.1% from year earlier. Townhouse prices average $415,684, 12% higher than in August 2020.
Shuswap Lake & Revelstoke
Waterfront: This region extends from the North Okanagan into the Columbia Valley and the town of Revelstoke at the start of East Kootenays, but it is the 89-kilometre long Shuswap Lake area which attracts most homebuyers. This year, waterfront properties along the giant lake, including in Salmon Arm, Blind Bay and Eagle Bay have attracted attention because of the lack of waterfront listings, and subsequent higher prices, in the rest of the Interior.
Waterfront listings in the Shuswap area also vanishing quickly, however. Since the start of the year, 27 active listings for residential waterfront had whittled down to just five properties still available as of August. The average waterfront detached house in the Shuswap-Revelstoke region in August was $851,613, down 11.3% from a year earlier. This represents the lowest price for waterfront properties in the entire Interior, but the sales-to-listing ratio for waterfront homes is running at higher than 95%. This points to higher prices in the months ahead.
Due partly to its relative distance from Vancouver, residential real estate is less expensive in the Shuswap-Revelstoke compared to other markets in the Okanagan, despite startling price increases over the past year. The average detached house price in August was $676,374, up 34.7% from August 2020. Condominium apartment prices have increased 25.2% to an average of $487,540. As in all of the Interior, the blistering demand has reduced the inventory of homes for sale. Detached house listings fell 16.6% in August from a year earlier to 63 houses, while the selection of condo apartments dropped by 27.7% to just eight units. The townhouse sector experienced a modest increase in listings, but there were still only seven units available, at an average sale price of $398,312 as of the end of August.
Despite being closer to the Lower Mainland, and rich in lakes and rivers, South Okanagan housing prices are lower than in the Central Okanagan, though there are exceptions. The southern region includes the popular lakefront towns of Penticton and Osoyoos, and Princeton, where two rivers converge, plus smaller resort and winery/farming communities such as Kaleden, Keremeos, Naramata, Summerland, Okanagan Falls and Oliver.
Those looking for a classic waterfront cottage will be tested: there were virtually no new listings for waterfront houses remaining anywhere in the South Okanagan as of this August.
Total residential sales in the South Okanagan through the first eight months of this year are up 62.3% from the same time in 2020, to 1,517 transactions, which is roughly half of the total sales in the North Okanagan so far this year. August active listings in the South Okanagan were nearly unchanged from a year ago, at 399, while monthly sales were down 18.5% from August 2020 to 149 transactions. The overall composite average price in August was $616,000, down 8.1% from a year earlier, but there is large variance in prices. This year six buyers paid an average of $265,000 for a condo apartment in Okanagan Falls, for example, while 10 buyers in August paid an average of $1.6 million for a detached house in Naramata.
Here’s a look at the most popular South Okanagan markets:
Osoyoos: With a dry climate and some of the hottest summer temperatures in the province, Osoyoos and its same-name lake is less than a five-hour drive from Vancouver and popular resort town. There are luxury lakefront and golf course properties where buyers can purchase quarter-shares in fully-furnished condos and place them in managed rental pools, and multimillion-dollar villas, but there are also more affordable apartments and detached houses. In August, the average condo apartment sold for $511,333, more than double the average of $247,750 a year earlier. But you can still find air-conditioned two-bedroom condo apartments in Osoyoos for less than $390,000 and four-bedroom detached houses for less than $650,000 (with a little searching we found two potential rental houses on half-acre lots in Osoyoos for under $550,000.) The average detached house price in August, however, was $909,000, up 24% from a year earlier.
In nearby Oliver, more rural and farther from the lake, nine detached houses sold in August at an average price of $559,722, down 12% from a year earlier; and condo apartments sell for an average of $269,500.
Penticton: Facing two lakes and a massive residential building boom, Penticton is a recreational and housing hot spot in the South Okanagan. A major retail and service centre for the region, the city of 45,000 people has at least a dozen residential projects underway this year, from rental housing to new luxury homes on the hills and lake-facing condo developments. After an 18-month run of rising home sales, August saw a correction, with detached house sales down 19% year-over-year to 48 transactions and new listings down 30%. The average detached house price, however, was up 29% from a year earlier to $809,233. Penticton’s condo market remains hot, with August sales up 18% year-over-year and average prices up 31% to $471,344. Townhouses are in short supply with August listings down 64% from August 2020 and sales down 29%, likely due to a lack of inventory. The average townhouse price, at $663,867 in August, was 60% higher than a year earlier and the sales-to-listing ratio reflects a seller’s market at around 70%.
Summerland: About 20 km. north of Penticton, Summerland is a quieter lakefront community known for excellent wineries, with some of the lowest housing prices in the South Okanagan. Total detached-house sales slowed sharply in August, dropping 58% year-over-year and the average price of a detached house fell 26% to $837,140. Listings for both condo apartments and townhouses are in short supply – just 4 and 5 new listings in August, respectively – but the average condo price is up 45% to $375,000 and townhouse prices have soared 84% from a year ago to $543,000. Summerland, with excellent beaches, great local wine and more affordable real estate, may prove one of the more popular home buyer destinations this autumn.