July 2022 – Okanagan Real Estate Market Analysis

July 2022 – Okanagan report faithwilson | Christie’s International Real Estate

Summer of opportunity for Okanagan buyers

Highlights of the July report

• Okanagan market is moving to a buyer’s advantage this summer
• The five-year mortgage rate has increased just 1.6% since February
• Central Okanagan building lot prices are up 91% from a year ago
• At $324,906, the North Okanagan has the lowest average condo prices
• South Okanagan waterfront home sales were up 150% year-to-year

The summer of 2022 will be remembered as the great season of opportunity for home buyers and real estate investors in B.C.’s Okanagan.

Just as few forecast the terrific residential market that began during a global pandemic two years ago, only a savvy few are now looking past the current higher mortgage rates and slowing sales to the future of the Okanagan.

For the ones that do, this is the summer and early fall they will recall – brief golden months when listings of homes for sale soared, prices eased, there was no foreign-buyer competition, spectacular assets came to market and mortgage rates were, yes, affordable.

Let’s look at mortgage lending rates, which have dominated headlines and speculation for seven months. Higher interest rates are widely blamed for a slump in housing sales across Canada.

Yet, after three increases in the bellwether Bank of Canada rate since February and blaring headlines about it, the average five-year fixed-rate mortgage has increased by just 1.6%.

On July 30, the five-year rate at big banks averaged 4.7%, according to RateSpy, compared to 3.1% on February 28 of this year.

Yet, the average price of a detached house in the Central Okanagan has eased from $1.21 million in February to $1.07 million as of July. The average townhouse price is down $60,000 in the same period to $707,297, while condo apartment prices dropped shed $8,000, on average, to $517,384 in July.

Homes are more affordable now, even with the slightly higher mortgage rates.

This summer, buyers are in the driver’s seat in the Okanagan, indeed across Canada, and it is a giddy feeling for those who once doubted they would be able to buy this year.

A total of 1,196 residential unit sales were recorded across the Interior Realtors Association region in July, a 33.3% decrease compared to the number of units sold during July 2021.

“Seasonally, it is not out of the ordinary to see a dip in sales in the summer, although real estate market activity across most regions in the province is below average, not just within the Interior,” noted Association of Interior Realtors president Lyndi Cruickshank, adding “a number of factors, or even a combination of factors such as the interest rate hikes, recommencement of travel and the school break could all be reasons consumers pushed pause on their real estate plans as they focused on enjoying the hot summer days.”

But buyers who are in the market now are enjoying a feast of opportunities, often served with generous price reductions.

New listings in July were up 8.1% compared to the same time last year, with nearly 2,500 coming to a market which now has a total of 7,698 properties to choose from, the highest level in perhaps two years.

It is not only home buyers but visionary land investors who are scouting the Okanagan this summer. After all, the Central Okanagan has the fastest-growing population in Canada, according to Statistics Canada, and immigration levels are at record highs. But there is a shortage of freehold land, since 40% of Kelowna is within the Agricultural Land Reserve and much land in the Okanagan is under Crown or First Nation control.

Ironically, the Canadian government will ban all foreign-home buyers for two years starting in January of 2023, despite raising immigration levels to all-time highs. Due to B.C.’s punitive taxes, offshore buyers now make less than 1% of the provincial housing transactions, according to the B.C. Ministry of Finance. This means there is a wider window of opportunity for locals, particularly investors.

The land shortage is quite severe.

In the Central Okanagan, for instance, while July residential property listings were up 42% from a year earlier, listings of building lots plunged 41% and listings for waterfront lots are down 50%. More on that below

There have been some major Okanagan land sales recently as bigger developers stake out future projects in virtually any urban land they can find. Examples include the April sale of the 11-acre former Costco site in Kelowna, which traded for $31 million. An investor recently paid $5 million for just over one-third (0.39) of an acre downtown. Last year 3.9 acres at Ellis and Bay Streets, Kelowna, sold over list price at $23 million. These transactions all work out to more than $3 million per acre. Yet, a 306-acre parcel above Kelowna with spectacular views is priced right now at $716,600 per acre; and we know of a prime waterfront site in Penticton listed at $998,000 and a 25-acre winery with a luxury home near Osoyoos priced at $6.9 million.

Sure, many buyers in the Okanagan and right across B.C. hesitate on the sidelines this summer. But it is the ones taking action now who may prove the big winners.

Kelowna and Central Okanagan

Let’s take a look first at what is happening with building lots in the Central Okanagan, because they will dictate the price of all types of housing over the next few months. It is rather revealing.

In July, the total number of building lots available was down 41% from a year earlier to just 30 listings. July was not an anomaly. So far this year, active listings for lots are down nearly 22% to 294 parcels.

But the average price of a typical building lot in July was up 91% from a year earlier, at $810,667. When waterfront lots are included, the average price is 244% higher than in July 2021, at more than $1.4 million.

In the meantime, the average composite price of a residential property in July was up less than 7% from July 2021 to $845,937.

What this tells us is that one can buy an existing home, including a detached house, in the Central Okanagan now for less than the replacement value because of the soaring price of scarce land, not mention rising costs of building materials and labour. Eventually, residential property prices will catch up, but right now they are looking like a bargain.

Detached houses: Sales of detached houses in the Central Okanagan, anchored by Kelowna, B.C.’s third largest city outside of the Lower Mainland, were down 47.3% in July compared to a year earlier to 124 transactions. This is also down about 50% from the average monthly sales pace since April of this year. The average detached house price in July, at $1,077,431, was up 6.5% from July of 2021 but down from $1,166,575 in June of this year to the lowest level so far this year. However, listings of detached houses soared 47.3% compared to a year earlier, to 468 houses and the total inventory as of July 31 was 1,126, a startling 132% increase from the same period in 2021. This is the buyer’s market that buyers have been dreaming of.

Townhouses: New listings for townhouses are down 3.7% from July 2021 to 102 units but the total inventory is at a healthy 281 properties, the highest level so far in 2022. With just 52 sales this July, down 47% from a year ago, the average sale price of a townhouse was up 4.6% from July 2021 at $707,297, which was slightly higher than in June 2022, but lower than the $768,155 average in May, which was the recent peak.

Condominium apartments: The average condo sold for $517,384 in July, up about $18,000 from a month earlier and 19% higher than in July 2021. Condo sales, however, dropped a sharp 51.7% from a year earlier to 85 transactions this July. There is a growing inventory of condos on the market with 461 active listings, up 61% from the of end of July 2021, including 208 new listings added this July. With a sales-to-new-listing ratio of 40% this remains a seller’s market but it is shifting towards balanced conditions.

Waterfront homes: Sales of waterfront property during the first seven months of 2022, dropped 56.5% year over year to 25 transactions, but the average price increased 40% to $2,831,667. Only 3 waterfront homes sold in July, while 9 new listings came to the market. In all, there are 36 active listings for waterfront homes on the Central Okanagan market, down from 38 a year earlier.

Vernon and North Okanagan

The overall sales-to-listing ratio in the North Okanagan in July was 25.8%, which is seen as a weak seller’s market. Total housing sales in July were down 14.5% from a year earlier, at 158 transactions.

Detached houses: Sales of detached houses in July were virtually unchanged from July 2021 (down 1%) at 86 transactions, representing the highest sales of any property type in this region. The average detached house price was up a modest 3.2% year to year, at $762,368 in July, but this the lowest price for a house this year, off from $829,948 in June and nearly $100,000 less than in May. Amazing, and a great opportunity for buyers. Active listings are 65% higher than a year ago, with 330 detached houses for sale in July, including 163 new listings. There are some fantastic opportunities right now in the Vernon-area detached housing sector.

Townhouses: The townhouse inventory in the North Okanagan remains tight with little relief in sight. There were just 38 new listing in July and total listings are 73 units. There are 31 new townhouses under construction, mostly in Vernon, which could be delivered by year-end. Townhouse sales in July slipped down 22.5% from a year earlier, to 24 units, while the average price rose 22.4% to $510,883, and was up about $8,000 from June 2022.

Condominium apartments: Condo prices may represent a bargain right now. While the average July price was up 12.5% from a year earlier, at $324,906, this was down from $417,394 in June and $10,000 lower than in May. It is also the lowest condo price in the Okanagan. July sales were down 14% from a year ago, at 18, but new listings were also down, falling 24% to 22 units. As of the end of July, there were 51 active condo listings, mostly in Vernon, down from 66 a year earlier. Not a single new condo unit started construction this year in Vernon so condos will remain a rare commodity in the region.

Waterfront homes: Six waterfront properties were added to North Okanagan listings in July, up from 5 at the same month last year, and the total inventory of lakefront homes is now 24, double the number in July 2021. Sales, however, have tanked. Only 1 waterfront home sold in July – at $3,570,000 – down from 6 transactions in July 2021. The average price of the 10 waterfront homes that have sold so far this year is $1,905,390, up 20% from a year earlier.

Shuswap – Revelstoke

The Shuswap-Revelstoke region, popular with boaters and vacationers and the start of the West Kootenays, saw July total listings rise 32% and total sales fall 35.8% in July compared to a year earlier. This represents an overall 20.6% sales-to-listing ratio, trending to a buyer’s advantage.

Detached houses: With a 17% sales-to-listing ratio, July posted 51 sales in a market with a total of 295 houses listed, including 96 added in July. The total inventory is more than double what it was last summer. The average July house price was $648,663, down from $775,767 a month earlier and down 2.6% from July of 2021. Buyers looking for lower detached house prices and a greater selection should be delighted with this buyer’s market.

Townhouses: Eleven townhouses were listed in July, nearly unchanged from the 12 transactions in July 2021, and there is now a total inventory of 26 townhouse for sale. The big change is the average price, up a whopping 65% from a year earlier to $679,410 and well above the $463,100 average in June 2022, when 11 townhouses also sold. The sales-to-listing ratio is running at 26.9% and the tight supply should keep townhouse prices elevated.

Condominium apartments: Just 5 condos sold in July out of a total inventory of 41 units, including 11 new listings added in the month. Sales were down 61.5% from July of 2021, while total listings were up 57%. Even with less competition and a much higher inventory, condo buyers saw the average price rise 55.4% year over year to $523,400, but that price that was down from $612,714 in June of this year. Due to the low level of sales, it is difficult to call this market, but it is clearly leaning to a buyer’s advantage. We expect to see some low-ball offers being made.

Waterfront homes: The Shuswap-Revelstoke area has some of the finest and largest selections of waterfront properties in the Okanagan. There were 50 active listings as of the end of July, up from 30 at the same time last year, including 14 new listings. Total sales in July were 7, down from 13 a year earlier, at an average price of $1,597,786, up nearly 7% from July 2021.

South Okanagan

A South Okanagan July snapshot shows total active residential listings up 31% from a year earlier at 1,280 and July sales down 34.8% to 161 transactions while the average composite home price is up 10% year to year at $650,568. This is not a normal summer in the South, where sales were also tracking lower in June.

Detached houses: The average price of a detached house in July was $745,126. This is 5.6% higher than in July 2021, but $10,000 below the June average and the lowest level this year. (The house price averaged $898,926 in April, for example). July posted 77 detached house sales, down 26% from July 2021 but even with June 2022. There are now 379 active listings, up 36% from a year ago, with 78 new listings added in June.

Townhouses: The 91 active listings in July were up 35% from July 2021 and included 32 new listings added this July. Sales in July dipped 10% from a year earlier to 8 transactions. The average townhouse sold in July for $469,356, down from $514,00 in June and far below the peak price of $580,445 in May 2022. This is a buyer’s market, perhaps the best for townhouses in the entire Okanagan.

Condominium apartments. New listings for condos dropped 34.6% in July to 32 while sales were down 57%, also compared to a year earlier, to 21 transactions.

This compares to 36 sales in both May and June. The July average condo price was 27.6% higher than in July 2021, at $467,062, which was about $40,000 higher than in June 2022. It looks like new multi-family supply is coming to Penticton, with permits for 227 new units worth $72.6 million issued so far this year, but most of these units are rentals.

Waterfront home sales in the South Okanagan flipped the script in July, with a 150% increase compared to a year earlier, with 5 transactions at an average price of $1,171,800. For the first seven months of 2022, 17 waterfront homes have sold across the South Okanagan, down from 28 a year earlier, at an average price of $1,490,647, 16% below the average in 2021.