As of this writing I can confidently say that the real estate market here in Kelowna has started to cool down from the crazy highs that we saw in 2021.
Last year was arguably the hottest real estate market Kelowna has ever experienced with every segment of the market seeing double digit increases in pricing.
For instance, the single family home price in Kelowna in 2021 rose by 32% year over year, sales were up 21% and inventory in the Central Okanagan fell by 38%.
The condo market saw similar gains in pricing moving up by 28%, sales went up by 64% (condos became the affordable alternative to single family for some) and inventory dropped by almost 50 points at 48.5%.
The townhouse market was busy, but comparatively speaking, not as hot as the other two segments with pricing up 26%, sales up by 13% and inventory down by 51%. The lack of inventory is what didn’t allow for a massive increase in sales compared to the other two segments.
What’s Happening in Kelowna in 2022?
If you believe everything you read you are probably looking to sell everything and head for a cabin in the woods to wait out the financial armageddon that is coming for us all.
I don’t believe that to be the case for Kelowna, demand has dropped off but is still strong for this part of the Okanagan. The big issue for Kelowna real estate right now is supply, there is just not enough land for developers to build single family homes on.
Now that said, Kelowna’s city council has no problem approving massive downtown multi-family developments. At my last count there will be 43 new developments coming in the next 2-5 years that will change the Kelowna skyline forever.
If you’re into condo living, there should be plenty of product to choose from over time. If you are looking for a single family, like 3,333 people did in 2021 the options will continue to be limited due to geographical constraints.
So the big question, is the real estate market in Kelowna about to go bust?
I think there could be a bit of a correction coming in the next 12-24 months, but the market busting in my opinion would be a drop of between 10-20% in one year. Even during the financial collapse of 2007/2008 we didn’t see numbers drop to that degree.
Kelowna Housing and Economic Statistics
The largest employer in the Central Okanagan is the health care industry, so basically, government. The second largest employment sector is the wholesale and retail trade sector.
For those outside of the Kelowna area you might be surprised that the mining, forestry and oil & gas sectors only account for about 2100 jobs.
The population in the Kelowna area has grown by just under 3% in the last year with the majority of the population being between the ages of 15-64 (65.25%). The 65+ demographic accounts for 21.5% and kids (0-14) round us out at 13.25% of the population.
The majority of sales that happened in the Central Okanagan were within the ‘board area’ which means the trades that were happening were people that were selling their homes here and buying a different home.
Approximately 29% of the home purchases in the Kelowna area were by other BC residents, 6% came from Alberta and 3% were from out of the country.
What is Driving the Real Estate Market in Kelowna?
Now that the scene is set, the answer to the question for people purchasing here out of the area, out of the province or out of the country continues to be a lifestyle change or property investment.
The people that are selling and buying within our area are either a lateral purchase (19%), a move up purchase (12%) and downsize (13%) or first time buyers (19%). These types of sales will continue to happen regardless of what the market is doing.
With housing starts down (lack of inventory) and the ability to ‘work from anywhere’ phenomenon that happened through 2020 and into 2021, we saw massive stress on the housing market (low vacancy rate for rentals) and this is why prices took off.
As housing supply starts to improve (as mentioned earlier, condos will continue to drive the supply), interest rates continue to creep up and demand begins to wane, we will begin to see that correction.
In fact, I would say that has already started judging by the days on market and the amount of price corrections happening in the marketplace.
If you are thinking of investing in Kelowna, we should talk.
If you are thinking of listing your home in Kelowna and are looking for knowledge and marketing expertise, we should talk.
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