Photo: Colin Dacre/file

Kelowna's building bubble has burst - or at least it has a slow leak.

Planning applications for the first three quarters of 2022 are about 20 per cent below the record levels experienced a year ago.

The total value of permits has also slowed compared with last year's peak.

The reason for the dip?

Partially because of economic factors such as higher interest rates, as well as last year's record-breaking building boom due to the COVID construction rebound.

Planning director Ryan Smith says the value of building permits to date is just over $900 million. That's compared with $1.2 to $1.3 billion during the boom of 2021.

"In terms of planning application volumes there were fewer in 2018, in 2019 and again in 2020. In 2021 with the COVID rebound, we saw a lot of applications come through our system," said Smith.

"In 2022 we see a slow ease on volumes and we'll see that again into 2023, mainly related to uncertainty caused by macro-economic conditions in Canada being rising interest rates."

And, while the number of building permits is down significantly (1,758 compared to 2,800), the value of those permits is higher.

"These high values are really driven by mega projects. That would be the One Water Street where you have two very large towers and expensive parkades to build.

"Those (values) come down quickly when fewer large projects do go ahead."

Of those projects permitted in 2022, Smith says they are skewed overwhelmingly toward multi-family projects.

Smith says approximately two-third of those are multi-family with nearly 80 per cent in the core area of the city.

"That's what we're looking for when we are talking about putting housing in the right place," said Smith.

"We are seeing the most density go in the core area of the city which is the most fundamental for us."

Smith says he expects to see a slower pace of development through the final quarter of the year and into 2023, somewhere at, or just above the 10-year average.

He adds while COVID did delay regular market trends, he believes there would have been a softening of the market regardless because of rising interest rates.

"History shows time and time again with peaks and valleys in housing and development approvals."