Unaffordable Kelowna home market has inspired these realtors to take action
Real estate sales is not just about making money. For an informal focus group in Kelowna, it’s also a chance to lend their expertise to the struggle to make housing more affordable in the Central Okanagan and beyond.
“Real estate has to stop being a commodity because we’re harming our families and our young people,” Blake Roberts, a realtor with the 97 Way Home Real Estate Group, told iNFOnews.ca.
He and the others in the group believe that real estate speculation has been a major driver behind the skyrocketing home prices over the past couple of years.
“My concern is the entry level home, the B.C. box, that bi-level in Rutland or Glenmore,” Blake said. “All realtors know this. They were getting bought up by speculators. Every time a young couple was trying to buy a house, they were going up against somebody with super deep pockets, all cash and paying, even though all our prices were inflated, over and above. They were speculating.”
Some of his clients are investors who haven’t taken kindly to some of his comments along these lines.
That, and the political overtones the discussion on affordable housing takes, is why another member of the focus group asked iNFOnews.ca not to publish their name.
Their concern wasn't about the entry-level house but the pre-selling of condos to speculators, who also drove those prices up as a number of projects were snapped up very quickly over the past couple of years.
“You have these investors, who are actually speculators, and they’re speculating on the market kind of like the stock market,” the realtor said. “I've seen an awful lot of investors coming from the Lower Mainland and Toronto doing that.”
The speculators buy into new housing developments by putting a deposit down during the presale period with no intention of ever moving in.
Given that it can take one to two years to build large condo projects, they are betting on the prices going up so they can sell their units and make a profit on their deposits – which can be 10 to 20% of the asking price.
As prices fall it can make more sense for them to walk away from those deposits than take an even bigger loss by actually buying the housing unit.
The realtor has seen, in other markets like Vancouver, Calgary and Toronto, major projects being postponed after speculators walked out on their deposits.
“They drove up the prices when they bought and, if they end up walking away from all these developers, all of a sudden you end up with hundreds of units on the market,” the realtor said. “Basically, it’s like an earthquake hits the market and it ripples through everything.”
While Kelowna is touted as a desirable place to live, the buyers have dried up so there’s no real chance that the developer can find new buyers, they said. While projects already under construction are not likely to be halted, those waiting in the wings may hesitate out of fear they'll end up with unsold units that have deposits on them.
READ MORE: You can still sell your home in a tough Kelowna real estate market if it’s priced right
Even though Roberts points an accusing finger at speculators, he stressed they are different from investors, such as those who likely will buy into buildings like the new UBC Okanagan tower in downtown Kelowna, because they likely plan to rent their units out.
When it comes to the single-family home market, which is more his area of expertise, Roberts said all three levels of government need to get together to solve the affordability problem by, for one thing, limiting the ability to speculate.
He pointed to the Country Rhodes subdivision in the Ellison area near Kelowna airport as an example.
It’s a 133-unit bare land strata, meaning there are rules imposed on owners by the strata council. One of those rules is that only 15% of the units can be rented out, Roberts said. Because it's a strata, it can police that rule.
“It’s of no interest to speculators because they can’t rent them out,” he said. “In the last eight years, if the average B.C. box has gone up, say, 90% in price, Country Rhodes has only gone up, say, 35% because it’s only of interest to families or people that are buying a home to live in.”
That’s the kind of thing that can be encouraged by local governments to increase affordability.
Senior governments could put a limit on the number of homes an individual can own, he said.
A rebate of GST credits for builders of entry-level homes is another option.
While there is a federal program of first-time homeowner grants, it’s tied to income so any household earning $120,000 per year ($150,000 in Victoria, Vancouver or Toronto) doesn’t qualify.
“If you’re making less than $120,000 a year, you’re pretty much not buying a house anywhere in B.C.,” Roberts said.
Another step in the right direction would be for Kelowna to follow Kamloops in setting fees to developers based on square footage rather than being the same for each unit, whether that’s a carriage house or a mansion.
Roberts agreed with what the District of Peachland did by requiring a $5,000 contribution into an affordable housing fund for each unit in the proposed Ponderosa development.
READ MORE: Peachland golf course project comes with hundreds of homes
The other realtor, who was talking about pre-sales, said Kelowna is too focused on the big projects.
“City Hall is putting its time, effort and energy into getting these massive big developments done, which are very very risky, and they’re not actually dealing with affordable housing,” the realtor said.
“That’s the problem. All of our eggs are in the wrong basket. What have they done over the last two years for affordable housing? What kinds of developments have they approved that have subsidized rent or rent control or: 'Hey big developer, you’re going to make $800,000 a door on this building,. We expect you to do something else with this particular site?'”
Roberts has approached both Kelowna Mayor Colin Basran and MLA David Eby, when he was housing minister, with some of these ideas.
Eby responded by asking for more information. Basran did not respond.
“We’re looking forward to a new council we can talk to and we’re looking forward to the province, the government of the day, realizing that housing is a regional issue," Roberts said. “How you solve a problem in Vancouver is entirely different than how you solve a problem in Kelowna.”
Any realtors interested in joining in the discussion on how to make housing more affordable can email Roberts here.
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