Many are wondering whether our market boom has passed. Today I would like to get to the bottom of this by taking a critical look at current conditions.
It seems that everyone has an opinion on the current state of real estate. Today I would like to address one much-disputed question in particular: Is the boom over?
Some say yes, while others say the sky is falling. But what is really going on? Let’s get to the bottom of this.
First, let’s look at how we got here. At the beginning of the year, new lending rules implemented at a federal level diminished the average person’s borrowing power by around 25%. Shortly after that, our new B.C. government unrolled their affordable housing plan. The market-cooling aspects involved in this plan scared off a number of buyers, including those from Alberta and even those coming from out of the country. Almost simultaneously, interest rates rose and made property slightly less affordable.
This trifecta of conditions has resulted in a 25% to 35% drop in sales. Yet, this only refers to the number of sales. Prices are still up 7% year over year and it still takes approximately 49 days, on average, to sell.
When you break down the conditions that have led to this drop in sales, you will find that the state of our current market makes sense. But what is really driving our market? Is it really these factors alone, or is it something bigger?
The Real Estate Investment Network answers this question well, using their long-term investment formula. You can see the graphic for this formula in the video above. According to this formula, real estate market conditions come to and from gross domestic product (GDP). GDP is essentially comprised of the job market and local economy.
"Whether you are buying or selling, you can rest assured that the rumours of doom and gloom are untrue for our market."
In Kelowna, our local economy is hugely impacted by our bustling technology sector. This sector currently provides over $1 billion in revenue into our local economy. So, with over 600 companies and over 8,000 local jobs, our tech sector has quickly become a force to be reckoned with.
Kelowna is also the No. 1 entrepreneurial city in Canada. This means people who could choose to live anywhere will often make the decision to settle right here. The 2,000 hours of sunlight we get, the 120 local wineries, the championship golf courses, and our multiple ski mountains are also major draws. All this just goes to show that our lifestyle in Kelowna is really wonderful.
But what really brings people to our city is jobs, and we’ve got more than just the technology sector going for us. We’ve got a massive construction industry, a huge healthcare industry, and so many other industries that provide an incredible number of jobs.
The population growth these jobs create translates to upward pressure on rental rates, which translates to decreased vacancy. This ultimately results in more people making the jump into the real estate market. With this in mind, you can be sure that our real estate market will not shrink unless the job market were to collapse. And there’s no indication of this happening.
If you are thinking about buying real estate, now is the time to take advantage of our market. There is a wider selection of properties here than we’ve seen in the past two to three years, and you’ve still got the chance to lock in a historic low interest rate.
Sellers, too, should think about making their move. There is no way to time the market perfectly, as the peak won’t be apparent until it is in the rear-view mirror. Whether you are buying or selling, you can rest assured that the rumours of doom and gloom are untrue for our market.
If you have any other questions or would like more information, feel free to give me a call or send me an email. I look forward to hearing from you soon.