While the ultra-rich really don’t care what interest rates are doing when it comes to buying homes, those aren’t the people buying into the relatively modest luxury market in the Okanagan.
That means people wanting to buy luxury homes at $2 million and more are taking note of rising interest rates, high inflation and a soft stock market.
“This is where you see markets changing,” Faith Wilson, president and CEO of Faith Wilson/Christie’s International Real Estate, told iNFOnews.ca. “Before, you may have hit it out of the park on every single one – 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 bids are not always happening now.”
Wilson’s head office is in Vancouver where she still sees some multiple offers. But that’s now rarer in the Okanagan.
“We aren’t seeing bidding wars and homes selling for $200,000 over asking price right now,” her Kelowna agent, Taylor McFadyen, said in an email to iNFOnews.ca. “Certainly, there’s a bit of a slowdown in the luxury residential segment.”
While a rising interest rate is one factor in the slowdown, so too is high inflation and a falling stock market, leaving people with less money they can free up for a second property or a luxury buy.
“Many clients I have spoken to have the ability to make a purchase right now but are just choosing not to,” McFadyen wrote. “They’re waiting to see what happens, or see if things go down any more before making that decision.”
With the stock market falling they don’t want to pull out investments to buy property until their stocks rise again.
The key to selling successfully in the current real estate market is to understand how it’s changing, Wilson said.
“It depends on who is looking at property,” she said. “Where are they? How did you price them? Why did you price them the way you did? Were you expecting multiples? When you’re first looking at a property you’re going to do your best, in a market that is changing, to know what the market value is. What would a willing buyer pay and what would a willing seller sell the property for?”
That means some Okanagan sellers are realizing they’ve overpriced their homes for the changed 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, she said.
“You’re talking a few points but, when you’re talking multi-millions, it adds up,” she said.
In terms of location, $2 million will buy a “pretty nice place to live,” in Kelowna but is an entry level home in Vancouver’s Westside, if any are available, Wilson said. Even in the east side of the city the entry level is $1.6 or $1.7 million.
“In the Okanagan, your money just goes so much further,” she said. “And it’s a great lifestyle, that’s for sure.”
Another factor affecting the changing market is that more homes are being listed for sale.
“People are thinking, if interest rates keep rising, maybe they should sell now instead of wait until the fall,” McFadyen wrote. “So, more inventory coupled with some buyers holding off, lessens overall demand and may drop pricing a bit.”
A drop in prices means any increase in interest rates – the next Bank of Canada increase is expected to be 0.5% or 0.75% on July 13 – may be offset by smaller mortgages, Wilson pointed out.
And, she added, rising interest rates are relative.
“Interest rates were pretty low through COVID and we’re just coming back to pre-COVID rates,” Wilson said. “I think we buy into the soundbites that we hear and go: ‘oh my goodness’ without taking a step back and saying: ‘What does that actually mean?’ Does it affect purchasing power? Yes. But it’s not anything extremely untoward right now.”
The reality is, even while the market is taking a bit of a breather, in growing areas like the Central Okanagan, there’s still a very high demand for housing, luxury included.
“At the end of the day, people who want to buy a home or need to buy a home, they will do it,” Wilson said.
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