Small interest rate cut won't move Kelowna real estate market: Re/Max

Photo: Colin Dacre

Buyers have the advantage in the Kelowna real estate market, according to Re/Max Canada.

And that is not expected to change after a rate cut by the Bank of Canada.

“Kelowna is currently a buyer’s market, with a robust number of residential and condominium listings on the market, giving buyers options,” said Re/Max in their annual fall outlook.

“Affordability continues to be a challenge for buyers, with lower inventory of single-family homes driving buyers to heavily consider price when making an offer. On the other end of the market, buyers looking at homes over the $1 million price point have a larger inventory to choose from.”

Re/Max says the average sale price in the Kelowna housing market for all property types was $816,159 between January 1 and July 31, 2024.

That’s a fall of 2.4% from $835,964 during the same period in 2023. Residential sales decreased 12% during the same time period from 2,724 sales in 2023 to 2,397 sales in 2024. The number of listings is up 17.8%.

Re/Max cites a lack of new listings, not enough new construction, construction delays related to labour shortages and increased costs and exclusionary zoning/land availability as the biggest factors contributing to the housing shortage in the Okanagan.

The Bank of Canada announced Wednesday it is cutting its interest rate by 25-basis points.

“For any significant movement in the Kelowna housing market to take place, the Bank will have to do more than just a 25-basis point cut,” said the Re/Max report. “As affordable housing options continue to be hard to find in Okanagan, there has been little movement in the market as a result of interest rate cuts so far.”

The report says if “reasonably affordable” properties are made available either through new construction or continued interest rate cuts, there could be movement in the market.

“Additionally, the restrictions on short-term rentals have had a large effect on the market, with properties (especially condos) being listed where they would have been used for vacation rentals in the past, which has increased the number of listings and pushed the market further into a buyer’s market, and away from a balanced market,” said the report.

In search of affordable housing

A national survey conducted by Leger, commissioned by Re/Max as a part of its fall outlook, revealed that housing affordability continues to be a huge issue for Canadians. Two-in-ten say they will feel more comfortable getting involving in the real estate market once they see there is more than a full point come off the current interest rate set by the Bank of Canada.

One-quarter of Canadians are actively saving for a home and are confident they will be able to buy soon. On the flipside, dropping interest rates now may prove too little, too late for some current homeowners, with 14% saying they need to renew their mortgage soon, and with the current higher interest rate, they may need to sell their home.

In the search for affordability, one-quarter of Canadians say that they are considering moving to another country (28%) and 25% say they are reconsidering whether to have children or start a family due to housing affordability challenges.

"Despite some consumer confidence starting to return to the market this season, the reality is Canadians are still grappling with some serious housing affordability challenges rooted in lack of supply. Yes, borrowing is becoming less expensive, but this won't make housing affordable in the long run," says Christopher Alexander, President, RE/MAX Canada.

"Markets ebb and flow, and as buyers re-enter the market and absorb inventory, we'll see more upward pressure on price."