Friday, Jun 6, 2008 - Thompson Okanagan Business Magazine.Is the Okanagan insulated from fallout from the U.S. cconomic downturn? As predicted, the housing market has seen a slight downturn with fewer sales (BC Real Estate Association first quarter results down 14%), more inventory being listed for lengthier periods of time (up 24%), and less upward pressure on home prices.
The question on everyone’s mind continues to be: "Are we seeing this trend as a result of the US economic downturn, or is this simply a return to more balanced market conditions after an unprecedented six year run?" There are a number of factors to consider as the market continues to moderate:
1. Affordability has become a real issue with many first-time home buyers simply unable to carry the costs of a mortgage for a single family dwelling, with many of these opting to postpone a purchase or choosing a more affordable condominium or town home instead.
2. According to BCREA, "The housing recession in the US and belt tightening by US consumers is negatively impacting forestry and tourism," leading to weaker economic growth in BC for 2008 and fewer cross-border purchases.
3. All this talk of the consequences of the US economic issues has many Canadians scared, some even talking of "recession".
Rising oil prices, rumours of world-wide grain shortages, and the problems associated with the strength of the Canadian dollar contribute to the fear, and consumers already feeling the impact of gas prices are becoming more alert to their spending habits and questioning their own sustainability.
However, amidst all this "doom & gloom" talk, BC’s economic fate, while having predicted to slow somewhat in 2008, will remain "one of the strongest economies and continue to attract Canadians searching for employment and lifestyle opportunities." (BCREA – Housing Forecast – Spring 2008).
The Thompson-Okanagan remains an attractive recreation and retirement destination. With those provinces in the manufacturing sectors—particularly Ontario—being hardest hit by the US fallout, this might prove beneficial for BC as would-be retirees decide to forego the economic crunch and migrate West sooner. And one factor that continues to attract affluent American and European buyers to BC and the Okanagan in particular is the inventory of luxury properties on the lake and ski hill.
In a Globe and Mail report, May 6, Elton Ash, executive vice president with Re/MAX Western Canada, echoes predictions that trouble across the border is bound to affect Canada’s market in the next year. Soon enough, says Ash, Canadian buyers—many of whom work for companies based in the United States—will begin to behave more frugally. The two economies are too closely related for there to be no Canadian downturn whatsoever.
But Ash believes luxury real estate will remain insulated from any woes. "It’s a separate market that drives itself," says Nash. "And right now, demand for high-end real estate—especially lakeshore property—is huge." Cameron Muir, BCREA economist, also indicates that despite the weakness in the US economy, BC is expected to see economic growth of 2.5% in 2008 and 2.7% in 2009, a percentage higher than most provinces. Net migration, combined with consumer spending and employment growth, will fuel the demand for housing, proving that BC’s real estate market can remain optimistic.
- Rod O’Keefe is with the O’KEEFE2 team operating out of Re/MAX Vernon. He can be contacted at rod@okeefe2.com