Though the market is still recovering from the implementation of the Canadian Mortgage Stress Test, real estate in the South Okanagan is gradually shifting to a millennial buyer’s game.
Dori Lionello, local realtor and president of the South Okanagan Real Estate Board (SOREB), said that compared to last summer, real estate sales have increased but prices are still “flattening.”
“As we approached and entered into the summer months, things have gotten more active. The housing market in the South Okanagan is stabilizing after we noted a steep drop from the implementation of the stress test,” said Lionello. “Things are slowly climbing as we get into better weather and the demand is still strong. Sellers have had to flatten their prices because they’re not able to reach for increases that we were seeing year after year. But I wouldn’t say prices are dropping.”
Lionello said prior to the stress test being enacted in 2018, listings in the area in 2017 were at a record all-time low, and the demand drove prices up. She said that the changes in mortgage rules have balanced the market out, so sellers have to be realistic with their price point.
“I often reference with clients what’s called a perceived equity. So someone will see their neighbour’s house sell for $650,000 and they think they should get $655,000 because theirs is better. And everyone has an emotional attachment to their house so they’re just trying for a bit more,” said Lionello. “But we’re seeing this buyer resistance because they simply can’t pay more.”
As more seniors in the area get ready to list their homes and properties, Lionello said millenials are eager to enter the market and become homeowners, but cautious of what they can afford and whether a newer or older home is the right fit.
“There’s a lot of pent up demand, and a lot of millenials entering their homebuyer years and they’re watching the market correct. But the government has made it 20 per cent more expensive for them,” said Lionello. “We’re seeing a lot of younger families being stalled by the $650,000 price point, and when you’re buying in the Okanagan where there’s a large retirement population, a lot of the homes are outdated.
“A lot of buyers want everything to be shiny and new, and there’s a lot of new housing coming online and pushing that market and there’s certain incentives for new home purchases,” said Lionello. “For example if you purchase under $750,000 you’re exempt from property transfer tax. And then you look at these single family homes built in the 80s and they’re expecting $650,000. So it’s an interesting market when your affordable homes are fairly dated and you have millenials wanting everything to be brand new and have immediate gratification, to move right in and nothing go wrong for 10 years. That’s versus moving into something at a similar price point but needs $100,000 worth of updating.”
Millenials may also be holding off on putting down their five per cent on a home purchase since prices have slightly dropped in the area from last year. She said this again is related to the market flattening out, and does not mean that sellers are taking a dive, but that millenials may be more hesitant to pull the trigger in case the numbers slip a bit more.
“I don’t think it’s possible for us to slip too much more though, because we have such a low vacancy rate that a lot of homeowners are saying ‘Forget it, I’m not going to let my house go for $50,000 less.’ They’ll opt to put a renter in there instead,” said Lionello. “So what we’re finding is that renters are almost paying more than what the homeowner is paying for their mortgage. So the rent is so high in this town, it doesn’t make sense to put more pressure on home prices because they can just rent them out.”
Lionello said no one can predict what will happen in the future in terms of real estate, but she anticipates a very busy fall when families return home from summer vacation. She said typically October is her busiest month and she believes it will remain steady as years prior.
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