Hot market is cooling: analyst

CMHC's Taylor Pardy tells homebuilders home prices this year won’t match record set in 2017 but will continue strong

The Kelowna housing market is resilient enough to withstand the uncertainties of the foreign buyers tax, speculation tax, tougher mortgage rules and rising mortgage interest rates, according to Canada Mortgage & Housing Corporation analyst Taylor Pardy.

“These are all factors that will shape the market rather than impact it,” said Pardy, who addressed a sold-out lunch Thursday at the Coast Capri Hotel, organized by the Central Okanagan branch of the Canadian Home Builders’ Association.

“Kelowna has strong economic fundamentals and strong population growth and is affordable compared to Vancouver, so the market will moderate from record 2017, but still remain strong and steady in 2018 and 2019.”

Non-Canadian purchasers represent only about two to three per cent of the real estate transactions in Kelowna, so Pardy doesn’t see the foreign buyers tax curbing the market.

He’s taking a wait-and-see approach with the speculation tax.

“We have to see how the exemptions and tax credits will work.

“All we know right now is we don’t know the impact. Since the tax applies in the City of Kelowna and the City of West Kelowna, it could shift demand more to Lake Country and Peachland.”

Pardy said this year’s single-family home sales activity is indicative of a balanced market, while townhouses and condominiums are still in seller’s territory.

Last year was a record year in Kelowna real estate that will be hard to duplicate.

Last year, construction started on a record 3,577 homes of all kinds — single-family, townhouse, duplex, condos and apartments.

Fifty-six per cent of those starts were rental apartments.

“That’s a number we won’t see again because the 2017 activity was in response to a critical shortage of rental apartments and an extremely low vacancy rate,” said Pardy.

The extra inventory means finding an apartment will be easier, but the demand will still see rents escalate.

Last year, the average monthly rent for a one-bedroom place was $910, which is expected to rise to $950 in 2018 and $975 in 2019.

In 2017, the average monthly rent for a two-bedroom place was $1,120, which is predicted to increase to $1,160 this year and $1,190 in 2019.

With the rental apartment supply replenished, construction activity this year is expected to turn more to condominiums.

Home-construction starts this year won’t set a new record with the corporation’s forecast ranging from 2,500 to 3,000.

So far this year, construction starts have pulled back 17 per cent for single-family homes, townhouse construction is off 12 per cent and condo starts are steady.

Last year was also record-setting in that the average selling price of a single-family home in the city rose 11 per cent and peaked at $720,000.

That record is unlikely to fall in 2018 as the corporation predicts average selling prices for single-family homes will see only single-digit increases from the end-of-2017 average of $678,000.

Meantime, average selling prices for townhouses and condos are forecast to increase more than 10 per cent this year and next.

At the end of last year, the average selling price of a condo in Kelowna was $332,344. For a townhouse, it was $458,656.