While the ultra-rich don’t really care what interest rates are when it comes to buying homes, those aren’t the people who shop in the relatively modest luxury market in the Okanagan.
That means people looking to buy luxury homes for $2 million or more are taking note of rising interest rates, high inflation and a weak stock market.
“This is where you see changes in the markets,” Faith Wilson, president and CEO of Faith Wilson/Christie’s International Real Estate, told iNFOnews.ca. “Before, you may have been successful in every one of them – you knew the market value was there and there were enough buyers and there was enough heat in the market and there would be more than one buyer coming to the table. Multiple offers don’t always happen now.”
Wilson’s headquarters is in Vancouver, where he is still seeing a number of offers. But that is rarer in the Okanagan now.
“We are not seeing bidding wars and homes selling for $200,000 above asking price right now,” his Kelowna agent, Taylor McFadyen, said in an email to iNFOnews.ca. “Certainly there is a bit of a slowdown in the luxury residential segment.”
While a rising interest rate is a factor in the slowdown, so is high inflation and a falling stock market, leaving people with less money to free up for a second home or luxury purchase. .
“Many customers I have spoken with have the ability to make a purchase right now, but simply choose not to,” McFadyen wrote. “They are waiting to see what happens, or see if things get worse before they make that decision.”
With the stock market crashing, they don’t want to withdraw investments to buy property until their shares rise again.
The key to selling successfully in today’s real estate market is understanding how it’s changing, Wilson said.
“It depends on who is looking at the property,” he said. “Where are they? How did you price them? Why did you price them the way you did? Were you expecting multiples? to find out what the market value is, how much would a willing buyer pay and how much would a willing seller sell the property for?
That means some Okanagan sellers are realizing they’ve overpriced their homes for the changing market, McFadyen said.
When it comes to foreign buyers, the currency exchange rate is a key factor, and that’s good for buyers right now, he said.
“You’re talking about a few points but, when you’re talking about several million, it adds up,” he said.
In terms of location, $2 million will buy a “pretty nice place to live” in Kelowna, but it’s an entry-level home on Vancouver’s Westside, if one is available, Wilson said. Even on the east side of town, the entry level is $1.6 or $1.7 million.
“In the Okanagan, your money goes a lot further,” he said. “And it’s a great lifestyle, that’s for sure.”
READ MORE: Thompson-Okanagan BC’s fastest growing region
Another factor affecting the changing market is that more homes are being put up for sale.
“People think if interest rates keep going up, maybe they should sell now instead of waiting until the fall,” McFadyen wrote. “So, more inventory coupled with some buyers being delayed, it lowers overall demand and can push prices down a bit.”
A drop in prices means that any increase in interest rates (the Bank of Canada’s next increase is expected to be 0.5% or 0.75% on July 13) can be offset by smaller mortgages, he noted. Wilson.
And, he added, rising interest rates are relative.
“Interest rates were pretty low during COVID and we’re going back to pre-COVID rates,” Wilson said. “I think we accept the sound bites we hear and say, ‘Oh my God,’ without stepping back and saying, ‘What does that really mean?’ Does it affect purchasing power? Yes. But it’s nothing extremely unfortunate at the moment.”
The reality is that even when the market is taking a breather, in growing areas like the Central Okanagan, there is still a high demand for housing, including luxury.
“At the end of the day, people who want to buy a home or need to buy a home will,” Wilson said.
READ MORE: The pace of home construction must triple in Thompson-Okanagan
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