Further decline forecast for Kelowna area market
Construction, sales, prices all expected to drop to ‘normal’ levels following 2 record-breaking years
Moderate. Correct. Balance. Adjust. Whatever description you want to apply to Kelowna’s housing market, it means the sector is in a slowdown.
Blame the hangover that comes after overheated, record-breaking years in 2016 and 2017.
Higher mortgage interest rates and tough new mortgage qualifying rules also have a hand in the slump.
And Vancouverites, who were selling their homes for $1.8 million and buying a comparable house in the Okanagan for $800,000, aren’t fuelling the local market the way they were a year ago.
Canada Mortgage and Housing Corporation’s Kelowna Housing Market Outlook for 2019 and 2020 covers all this and more.
The Kelowna census metropolitan area (basically the Central Okanagan’s Kelowna, West Kelowna, Lake Country and Peachland) is forecast to continue to grow in population and jobs this year, next year and 2020, but not at the same rapid pace as in 2015-17.
The population forecast is 205,100 for the end of his year, 208,400 in 2019 and 211,000 in 2020.
The number employed is expected to hit 103,000 by the end of this year, 105,000 in 2019 and 106,100 in 2020.
In 2017, construction started on 3,577 homes of all kinds in Kelowna — singlefamily detached, townhouse, condominium and apartment.
That’s a record, driven mostly by a spike in apartment building construction to address the shortage of rental units in the city.
With that demand met for the moment, apartment construction has slowed, as has the building of other housing types.
This year, the number of new-home construction starts is expected to come in at about 2,500, a 42 per cent plunge from record 2017.
The 2,500 starts is still considered healthy and above average.
However, by 2020, the number of newhome construction starts could be down to 1,400 to 1,800, which is considered normal.
The number of home sales on the Multiple Listing Service peaked at 6,693 in 2016.
Activity dropped 15 per cent to 5,836 in 2017 and is expected to plunge a further 25 per cent to about 4,650 by the end of this year.
In 2019, sales on the Multiple Listing Service are forecast to be around the same, at 4,650, and pick up in 2020 to about 4,745.
Again, this level of activity is historically considered healthy, normal and balanced.
The forecast combines the prices of all types of housing to come up with the average selling price of a home on the Multiple Listing Service.
Even though the sales market was slipping earlier this year, a record average selling price was set at $584,500.
That’s expected to moderate next year and in 2020, with the average expected to be about $580,000.
The rental vacancy rate was an ultratight 0.2 per cent in 2017, and it’s already started to ease this year to 0.5 per cent with all the new apartment inventory coming on stream.
Next year, it is predicted to increase yet again to 1.2 per cent and 1.6 per cent in 2020.
Despite the higher rental vacancy rate, average monthly apartment rents will continue to rise from $990 this year to $1,015 next year and $1,040 in 2020.
For an average two-bedroom unit, rent will inch up from $1,210 this year to $1,250 next year and $1,280 in 2020.