Interest rates keeping buyers ‘on sidelines’

Officials say the rise in interest rates is having a strong impact on residential sales in the Okanagan.

The number of single family homes, townhouses and condos sold last month were down throughout the valley.

There were 120 sales in the North Okanagan, which was down 29 per cent from September 2021, with 334 sales in the Central Okanagan, a drop of 39 per cent.

“We are seeing that the Bank of Canada’s interest rate tightening in the last few months is keeping some buyers on the sidelines although demand remains strong,” said association president Lyndi Cruickshank. “With no mortgage rate relief anticipated any time soon, some potential homeowners are constrained from being able to enter the real estate market.”

(Image credit: Association of Interior Realtors)

At the same time, the number of active listings was up 89 per cent in the Central Okanagan (2,122) and by 44 per cent in the North Okanagan (672).

“While inventory levels have been climbing, it is still far below pre-pandemic listings levels and far below where it needs to be for the needle to move into a balanced market. Pent-up demand is still outpacing supply; however, the increased levels now offer buyers greater options and opportunities than they experienced in early 2022,” noted Cruickshank.

Benchmark prices for Okanagan homes were higher in all categories compared to September 2021. The price for single family homes in the North Okanagan last month was $731,800, an increase of 4.6 per cent.

For the Central Okanagan, the benchmark price fell below the one million dollar mark in August, to $981,800, which is 1.6 per cent higher than one year ago.

Townhomes in the North Okanagan saw the biggest benchmark price increase for the second consecutive month, to $572,500; up 25.9 percent compared to September 2021.

(Image credit: Association of Interior Realtors)

It’s taking longer to sell homes in the area, with the average at 48 days in the Kelowna area and 51 for the Vernon region.

The Bank of Canada’s policy interest rate currently sits at 3.25 per cent, following an increase of 0.75 percentage points on Sept. 7.

The central bank’s benchmark rate has gone up three percentage points across five consecutive hikes since March.

Bank of Canada governor Tiff Macklem said today more interest rate hikes are still necessary to bring inflation down, despite some early signs of a slowing economy.