You won’t see a for sale sign on any one property for long in the South Okanagan, according to local real estate agent Pamela Hanson, with demand high for a low-supply market. Submitted photo

High demand and few listings cause soaring house prices

The South Okanagan is looking at record real estate sales this year, mostly driven by high costs

The South Okanagan Real Estate Board (SOREB) is reporting record numbers in real estate exchanges in sheer dollar values, but the actual sales are effectively flat compared to last year.

Halfway through 2017, SOREB reports just under $627 million in sales so far, up from $587 million at the same time last year. That’s a nearly seven-per-cent increase over a year that hit $1.12 billion, the first year the board has seen over $1 billion traded.

But this year’s increase in money flow hasn’t come from any bump in the number of sales. In fact, this year there have been 1,527 sales altogether, a drop of two sales from last year.

“That’s because prices are rising at a pretty rapid rate, about eight or nine per cent in the last couple of months,” said B.C. Real Estate Association economist Brendon Ogmundson. “The reason for that is that there’s just no supply in the market. So if we looked at total listings in the market, they’re … what looks like a decade low in total listings.”

That low supply has been met with a high demand for housing, which is driving up prices. But the 1,500 sales this year so far is still something to brag about for local real estate agent Pamela Hanson, president of SOREB.

“I was pleasantly surprised to hear that Penticton’s actually doing better than Kelowna, in terms of sales,” Hanson said, noting that comparison is on a per-capita basis.

With Penticton sale prices soaring, Hanson noted the average sale is reaching a higher price than that of Kelowna, as well.

Ogmundson said in the Okanagan a long-held trend of Albertans driving sales is shifting to more of a westerly flow over the past couple of years.

With low oil prices, Albertans have been buying fewer homes, but Ogmundson points to an increase in buyers coming from the Lower Mainland, often escaping a red-hot market.

“For a long time, it was more like 15 per cent of sales were from Alberta and about eight per cent or so were from the Lower Mainland,” Ogmundson said. “Those two have kind of swapped, so now we’re seeing more like under 10 per cent from Alberta, and sort of 15 per cent from the Lower Mainland.”

That could mean even higher demand if and when Alberta’s oil patches recover, according to Ogmundson.

Hanson said the high prices and low availability has been cause for frustrations for those trying to get into Penticton’s market.

“They call on something and a lot of the time it’s already gone before we have a chance to look at it,” Hanson said.

For 2017, the BCREA is predicting an average sale price increase of nearly 10 per cent for single-detached homes, with a decrease of around 0.4 per cent in home sales over last year.

At least part of that forecasted decrease is taking into account an increase in interest rates from the Bank of Canada, to the tune of around 0.25 percentage points, inching toward the three-per-cent point.

An increase in Bank of Canada interest rates generally means a hike to interest rates down the line to the smaller banks that make loans for things like mortgages.

“That affects variable rates, mortgages, but also five-year fixed rates that most people use to finance their homes. Those are going to be going up over the next year, and that means probably lower sales this year in the second half and into next year as well,” he said.

But Hanson offered an alternative result from the interest rate hike: an increase in sales.

“Maybe that’ll actually put a push on more and more people want to buy because they’re trying to get in before maybe another hike happens,” she said, adding that prices are likely to drop in the next couple of years, as a seven- or eight-year trend comes to a close.

“It’s a crystal ball kind of thing; it’s hard to know,” said Hanson.