A fall-off in inter-provincial migration and the anticipated provincial speculation tax are two factors taking some steam out of the Okanagan housing market.
But an analysis done by Central Mortgage and Housing Corporation for Vernon, Kelowna, Prince George and Kamloops still finds some positive new home construction indicators.
Kelowna continues to see a sharp rise in multi-unit residential construction, while both Vernon and Prince George continue to see new home construction growth while attached home construction in Kamloops has increased 10-fold over last year.
Taylor Pardy, analyst for CMHC, says Vernon housing construction looks to double over last year, as 2018 comes in the wake of equally strong years in 2017 and 2016.
“Vernon has seen, up to July, 60 new housing starts come on stream compared to 31 last year, so that is quite significant, and overall for the first seven months of 2018, there have been 279 housing (single, semi-detached, row and apartment) starts compared to 177 last year. So overall, Vernon is seeing a fair amount of building activity in the housing market this year,” Pardy said.
Kelowna has hit a bit of a lull in new-home construction after some recent robust years, but the slack has been taken up by builders turning to multi-unit construction opportunities.
“It was a record year for new home construction in Kelowna last year, and 56 per cent of that was related to the multi-unit rental market,” Pardy said.
“That definitely speaks to the fact the vacancy rate has been so low the last three years, but builders are now choosing to build in the rental market as the rental cash flow for those projects has become a little more attractive.”
Pardy said the drop-off in inter-provincial migration, such as prairie province residents retiring to the Okanagan or choosing to live here and commute to where they work, as having a significant impact on the Central Okanagan housing market.
“I think that is a reflection of a bit of an economic slowdown, particularly in Alberta, and that has a residual affect on housing demand and prices ultimately,” he said.
“When that migration softens a bit, it tends to be reflected in B.C. Interior centres above the 10,000 population mark.”
The speculation tax right now, he said, is more about policy shock anticipated for a new provincial revenue generating directive that has yet to be implemented.
“It’s a bit difficult right now to assess that policy shock. We will have to wait and see what happens with that tax once it is implemented,” he added.
The tax is due to be adopted this fall directly impacting Kelowna and West Kelowna, but no other Okanagan markets.
West Kelowna Mayor Doug Findlater has been a vocal critic of the tax. He along with Kelowna Mayor Colin Basran met with Premier John Horgan earlier this summer on the issue, but so far there is no indication either community will get a reprieve from being part of a speculation tax zone, joining the Lower Mainland and southern Vancouver Island.
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