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KELOWNA REAL ESTATE IMBALANCE

Oct 14, 2022

KELOWNA REAL ESTATE IMBALANCE
A home is typically your largest asset. It should be researched thoroughly prior to purchasing and during ownership. It’s not just a place to lay your head at night, enjoy family dinners and raise a family. It’s an investment, and with such, it is important to understand population growth, future trends, government planning, and all the related housing that will be required. Residential real estate in Kelowna is at a pivotal point, as the city works diligently to navigate shortages and housing costs. The research compiled conveys an imbalance in the housing market. This will result in strong buyer opportunities within Kelowna which will remain throughout the next 5-8 years.

Statistics Canada reports Central Okanagan’s population rose 14% from 2016 to 2021. To put this amount of growth into perspective let's first review the “Facts in Focus” newsletter released by the City of Kelowna in 2018. It outlines the general population and housing in Kelowna and goes on to express growth estimates. At the time, the population of Kelowna was 129,500 and the city projected an annual average growth rate of 1.34% over the next 20 years. They based this projection on a range of factors including the birth rate, death rate, and both international and national migration. Today, just 4 year later, Kelowna’s population is 153,148 with an annual growth rate of 4.28%. The city did not anticipate a population this large until mid year 2034. As a result, the city's planning and development department has taken drastic measures to accommodate rapid growth, which has created opportunities for real estate investment.

Kelowna’s 2040 Official Community Plan (OCP) reviews housing starts and sets a guideline in an attempt to keep a healthy balance between single-family dwellings and multi-family housing. Back in 2018 the guideline was 57% multi-family housing and 43% single-family dwellings, but needless to say they have struggled to maintain such balance. The OCP always intended to increase multi-family housing overtime but due to rapid growth and affordability challenges the city has adjusted to their long-term plan sooner than anticipated. This new plan entails a split of 79% multi-family housing and 21% single family dwellings.

Upon reviewing Kelowna's rapid growth and the updated OCP guidelines, it becomes evident that maintaining a healthy balance between single-family dwellings and multi-family housing would be nearly impossible to maintain while still having homes for our rising population. Single-family dwelling construction simply could not have been built fast enough to keep up with demand. CMHC stats reveal the first eight months of 2022 and the findings are of no surprise; single-family homes only made up 16.2% of housing starts.

Throughout Kelowna cranes can be seen on the skyline and many buildings have only begun construction of phase one of several phases. A housing start for multi-family housing is defined as “The stage when the concrete has been poured for the whole of the footing around the structure.” As a result, future phases of these buildings are not accounted for within the housing starts data. Kelowna councillors will continue to approve more developments while the current developments get built out. This will cause the amount of multi-family homes starts to rise further and as a result could force the amount of single-family dwelling starts below 10%.

This construction model does not keep up with the long-term demand for single-family dwellings as supply remains relatively stagnant. At the end of 2021, Kelowna had 67,336 occupied dwellings, of which 29,164 were single-family dwellings and 38,172 were multi-family homes, which equates to 43.3% of the market share being single-family dwellings. In 5 years time, estimates show the number of single-family dwellings to multi-family homes could be as low as 34% and by 2040, 25%. Single-family dwellings will become under supplied causing prices to increase. The greatest increase will occur over the next 5-8 years as large developments in the city complete and the population rises.

Kelowna has become a mid-size city faster than most anticipated. The city has done a great job reacting to our rising population but with growth comes change, and transition creates opportunity. This opportunity lies with single-family dwellings as we have seen almost nine multi-family housing starts for every one single-family dwelling start. In conclusion, if you own a single-family dwelling, hold on to it. If you are in the market to purchase a home and want a great return on what is most likely your largest asset, purchase a single-family dwelling. At the time of writing this article the average single-family home price for the month of September was $1,090,830.

Company Contact Information:

Company: Blake Hilts - Team Simpson - Royal LePage Kelowna
Contact Name: Blake Hilts
Contact Phone: 250-801-1948
Contact Email: [email protected]
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