With the COVID-19 crisis infiltrating every part of our lives over the past few months, the Canadian government has been on a race to put policies in place to stop the spread of the virus. The order to practice social and physical distancing has had a huge impact on our daily lives, forcing non-essential workers to work from home, schools and business to be shut down, and mandating the general population to stay in their homes. This has led to a shift in the global economy, and how Canadians are choosing to spend their money. Across Canada, the real estate markets have been affected, including the beautiful region of the Okanagan in British Columbia.
Defined by the basin of the Okanagan Lake and the Canadian portion of the Okanagan River, the Okanagan is known for its sunny climate and lakeshore communities. Water sports, boating, skiing and hiking are all popular activities for residents, and the economy is commercial recreation and retirement based.
Known for its thriving wine and fruit industries, the Okanagan region and largest city Kelowna have become a popular locale for expatriates looking to settle down outside bustling metropolitan cities like Vancouver. Amid the current uncertainty in the real estate markets throughout Canada, this leads us to wonder how Okanagan’s housing market is being impacted.
Adapting to the New Normal
The beginning of spring in the Okanagan normally coincides with an influx of for sale signs throughout residential neighborhoods. While volume of sales in March were up nearly five per cent, the beginning of April saw a downturn which coincided with the pandemic picking up momentum.
Due to social distancing and efforts to limit the spread of infection of COVID-19, non-essential workers began working from home, and many businesses have been forced to temporarily shut down. In order to survive, finding ways to adapt to the new normal has proved beneficial for many, including realtors. Regular open houses and showings are generally deemed unsafe due to concerns over the virus, with the exception of vacant homes and new builds. Realtors in the Okanagan have adapted and shifted their services online by using virtual open houses and video tours in order to continue selling homes.
Market Will Slow
While the Okanagan real estate market remained somewhat stable in March, being close to on par with last year’s numbers, a downward trend is likely expected. The Okanagan saw sales totalling 551 in March, which is an increase from 435 in February and almost level with last year’s numbers of 545. In March, residential listings equalled 1365, which is a leap from February’s 939.
Active listings totalled 3341, which is an increase from February’s 2996. However, this is a drop of six percent from the same time last year. While the market remains generally stable, as the economic impacts of the COVID-19 crisis continue to develop, we will likely begin to see a slow down in the Okanagan market.
Cooling in Kelowna?
The 2020 Kelowna Housing Market Outlook predicted a balanced market in 2020, after seeing an approximately eight percent decrease year over year in number of sales. Move-over and first-time home buyers were expected to drive demand in 2020, and with the new speculation tax, sales of luxury homes have tapered off year over year. The drop in sales can be attributed to the difficulty home buyers are experiencing with attaining an affordable mortgage.
Kelowna’s population growth in recent years is due primarily by Canadians from British Columbia and other provinces moving into the region. The average sale price for a detached home has increased substantially since 2012, making Kelowna largely unattainable for first-time home buyers. Many couples earning the median income can only realistically afford the average condominium apartment.
Due to the high prices of homes, the labour industry has been negatively impacted, and it has become a challenge to attract employees and younger people to the region. To counteract this trend, the British Columbia government introduced measures in 2018 in the hopes of cooling the real estate market. These measures included an increase to the foreign buyers tax and the introduction of a speculation tax in Kelowna. With a potential cooling of the real estate market in the Okanagan due to the COVID-19 crisis, we may see prices begin to drop, allowing more first-time home buyers a chance to enter the market.
Good Time to Buy or Sell?
Home buyers waiting for their chance to jump into the market may now reap the benefits of lower interest rates, along with prices that remain relatively stable from last year. There is now the potential to get a larger mortgage, which will make buying more attractive for some. With concerns over the pandemic, it is challenging to view homes and visit the bank in person. However, with realtors and businesses adapting to the current situation almost everything can now be done virtually. Prices are unlikely to increase dramatically going into 2021, so home buyers should be able to enjoy stable prices for some time.
For those looking to sell, now may be a good time with the seasonal real estate cycle normally favouring sellers in the first half of the year. Those whose homes are their primary retirement savings, real estate investors and home flippers may stand to gain the most from selling at this time as there is the risk that home prices will drop due to recession and shrinking in the Canadian economy. Of course, selling at this uncertain time brings about several difficulties. It is currently more challenging to hold open houses due to efforts to contain the COVID-19 pandemic, but these can be done virtually with the help of a qualified realtor.
With lower interest rates and generally stable prices, more home buyers may now see their chance to enter the housing market in the Okanagan. If you are interested in jumping into the real estate market at this time, always ensure you work with a qualified, trained RE/MAX REALTOR® who can best assist you and guide you through the market.