What's driving the Okanagan's runaway real estate market?

Pandemic pumping housing

You only have to take a glance at real estate listings across the Okanagan to see how hot the market is right now.

Those with money to spend are gobbling up real estate at record levels, and at record high prices, with many paying above the asking price.

Earlier this year, the cost of buying a single-detached family home in the Central Okanagan jumped $100,000 in just 60 days. That's in stark contrast to a $100,000 rise over the previous 12 months.

That has also bled into the rental market, where the average two-bedroom listing on Castanet reached $2,000 a month.

Why is this boom happening now, in the midst of a worldwide pandemic?

Brendon Ogmundson, chief economist with the BC Real Estate Association, believes much of the boom is because of the pandemic.

"This time last year, we saw listings really fall due to social distancing, people were pulling their listings off the market. At a time when we normally have the highest level of new listings, we had none," said Ogmundson

"At the moment, there's a little more than a month-and-a-half of inventory available, which is extremely low. A ratio that low is going to see a fast acceleration of prices.

"Homes are not available and, when they are, they're not available for a long time. If you are coming from the Lower Mainland and you've sold for a pretty significant price, you can move to the Okanagan and you can win a lot of offers with that extra money."

While migration into the country has collapsed due to the pandemic, both inter and intra-provincial migration remains high.

Ogmundson says it's those groups who seem to be helping to drive up prices.

An older demographic who have accelerated their retirement plans due to the pandemic and a younger age group who can now work remotely.

"When we look at the numbers of where buyers are coming from, a lot of it is from the Lower Mainland. I think part of that is the ability to work remotely, and people can stretch their dollar a lot further.

"The Okanagan has a lot more available single-family homes compared to areas around Vancouver, and they're a bit more affordable."

Ogmundson says we are also seeing people continue to migrate from Alberta looking for employment.

Several other factors are also helping to drive up prices, the most important of which are record-low interest rates.

The affect on employment and savings have also been a factor,

"High wage employment is up 10 per cent since the pandemic. Your job may have changed, but you haven't really felt this as much as lower wage earners have.

"And, savings in 2020 were extraordinary. In 2020 alone, Canadian households saved more than they had in the previous six years combined, $200 billion."

Ogmundson says a lot of that money is being spent around real estate right now.

The good news for buyers, Ogmundson says the current trend is not sustainable.

"There are already some signs things are cooling off a bit, but when I say cool off, we're going from smashing previous records to just marginally beating previous records."

Ogmundson does expect to see a return to some normalcy in the market over the second half of the year, but adds due to low interest rates, sales should remain very strong.

"There will be a natural burning out of markets," he says. "Once we hit an affordability threshold that we are at now, we always see things slow down on their own."

He expects price growth to stabilize into the two to three per cent range, although that could take several months to achieve.

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