Will our current global economy affect buying decisions this year?

Undoubtedly there will be an impact from the confusion and unpredictability in our current global economy. Coupled with temporary over-development in the Condo market in BC and Alberta, we might expect to see a slightly more reserved buyer coming to the Okanagan this year.

One thing that is evident is that with the low mortgage rates and the last few years' appreciation in property values, we see many families taking advantage of their personal net worth gain and using low interest rates to move up a little on the housing ladder. In growing resort communities like Kelowna, one of the best barometers is the local house buying and selling market. If there is confidence in the local community it is communicated outwards to visitors to Kelowna which is still where the majority of our sales come from.

This past few weeks, we have learned more about the depth and breadth of the "sub-prime" lending fiasco in the US that has some serious ripples globally, and while we see impacts in Canada, once those impacts are overlaid on solid economic data (with the exception of the manufacturing sector) we are seeing very minimal reaction to the crisis.

The Okanagan Mainline Board stats for February indicate a slight decline in volume of sales month over month last year. However, March has shown serious signs of a more frenetic pace of sales as we get into spring months. The decline is likely attributable to a slowdown in housing markets in Calgary and Edmonton. While retirees (as we have stated in the past) are less sensitive to unsystematic risk such as global economic impacts of exchange rates and interest rates, they still require to sell their primary residence in Alberta and board stats from that region are showing increased inventories of properties for sale and sales prices that are lower than the most recent government "market assessments"!

On the whole, while the first two months of the year are likely on par with last year's sales (January being another record month) we maintain a very bullish outlook for the Okanagan. What we will see is more creative offerings, including an increase in fractional real estate to offset the carrying costs of a recreational property and rental guarantees as an option at some resort locations.

As we look forward, one of the areas to keep an eye is the oil and gas markets that, while we feel may have been out of control, have only recently surpassed the inflation adjusted 1981 values. However, the net pump price will have an impact on the decision of travellers to come to the Okanagan in their vehicles. In a recent article, Peter Yesawich of the famed Yesawich, Peppardine and Brown consultancy quoted a survey on traveler's appetites for vacations in this era of high gas prices:

As revealed in the results of this national survey of 1,546 active leisure travelers:

Nine out of 10 travelers (87 percent) expect gas prices to rise this year.
The price per gallon at which the slight majority of American travelers said they would change their vacation plans is $3.50. Six out of 10 (61 percent) travelers said they would change their vacation plans if the price at the pump reached $3.75 per gallon.

When asked how their plans would change, the most frequently mentioned responses were "take fewer trips" (35 percent) and "cancel my trip" (31 percent). One out of four (26 percent) travelers said "drive a shorter distance" or "postpone my trip until the price of gas comes down."

Interpretation? Americans clearly are concerned about the price of gas. But their desire to travel remains robust.

Whilst this survey is relative to the US, I would expect it to mirror Canadian intents very closely.

Even with the headline grabbing statements in the media, relative to a weakening global economy, most senior real estate agencies are reporting projected increases in property values in BC to be in the 7%-10% range, our feeling is that overall, we would expect to see 12%-15% in the Okanagan with some sectors of the real estate economy lagging behind that a little.

Enjoy the spring, and don't forget to take advantage of a great time in the season to list your property and gain valuable exposure before the summer holidays.