suzied.ca

September 2008

After repeated speculation that the average sales prices in the Central Okanagan would drop, and months with the stats defying this popular theory, August finally saw a small decline in the average sale price of single family homes, at -2.5%. This a modest adjustment off the average sale price, and my experience working in the field tells me we have seen much more. Why is this number misleading? Likely because of the tremendous selection in todaysmarket place, with so much to choose from, buyers are simply spending the same amount of money, but getting more house. There is no stat to support this, but my guess is that todays buyer has about 10% more power than they did a year ago. So, is the market due for a major drop, and what about the global economy, which seems exceedingly reactive to the economic picture in the States?

Real Estate values here have corrected, that much is evident. Over speculation of builders and developers, plus the cashing out of prudent investors have pushed inventory levels to unprecedented levels. But people are still continuing to move to one of the most desirable places in Canada; the Okanagan. In fact, between 2010 and 2020 it is projected that over 10 million Canadians will turn the magic age of 60, the golden years when where you live is more important than what you do for a living. Where is this aging population going to go? You guessed it…a huge chunk of these baby boomers are going to elect to stay primarily in Canada, where they have cheap medical care. AND they will likely choose a region that offers the best lifestyle, has a mild climate, is near a major airport, and has the best WINE in the country- RIGHT HERE! Are we ready for this influx? Will demand in our valley eventually out pace supply once again? Absolutely.

So much like the stock market, the down turn should be a signal to the prudent investor to BUY not panic. And while we all like to claim to have sold at the peak, and bought when prices are low, real estate cycles are silent beasts… you never really know when your at the top until you start to come down. And where is the bottom? If history repeats itself like it did over the last down cycle of 1995-2001, the largest average decrease we are going to see is likely -2.5% over a 12 month period…. exactly the percentage we experienced in August. So will the market get much worse? Likely not much for the single family sector, is my guess. I look forward to a few years of more level trading, where sellers actually compete for buyers a bit, and buyers have time and selection to really make the best choice.

Likely the next few years will remain stable, but if you are on the outlook for a deal and have a 5- 10 year plan, you cant go wrong jumping in at anytime! My investment picks are single detached family homes, with an strong lean on ranchers and solid bungalows that could lend themselves to an overhaul and be marketed as a retirement home option down the road. I love neighbourhoods close to ammenities and recreation,especially Kelowna South,Peachland flats and Lakeview Heights.

How well can you expect real Estate in the Central Okanagan to preform over a long period of time?

Heres the history,

In the last 5 years, prices went up 200%(average price went from $240,000 to $ 476,500)

In the previous 10 years, prices went up 275%( average price went from $176,000 to $ 476,500)

And if you were smart,( and old enough :)) and held real estate in our valley for 20 years, you would have watched prices increase by 475%!

Real estate is a wonderful part of any wealth portfolio - even if it is only for your primary residense. It is the backbone of all other investments, and with a long term plan you simply cant go wrong!