By Ozzie Jurock
The startling real estate market that has formed in British Columbia's Southern Okanagan, as pressure from the Lower Mainland, Calgary and points east converge on a collection of eleven small towns and villages, is truly amazing. JREI has always been bullish on this sunny land of lakes and wine, but we concede that we are surprised at the consistent strength of both real estate sales and prices. Landcor Data Corporation reports that the average sale price across the Okanagan rose 13.9% between 2004 and 2005, 22.5% from 2005 to 2006, and jumped 11% in just the first three months of 2007. And, aside from the Kelowna juggernaut, much of the action is taking place in a swath east from Osoyoos to Summerland, where some prices are up 20% or more from last year.
We wrote about Osoyoos several times in the last 10 years, notably in August of 2002 (The South Okanagan) and then again in 2005 (Osoyoos, Oliver, Penticton - Napa Valley North?). (In fact we've talked about it 61 times in total!)
Well, Osoyoos, a town of around 4,000 near the U.S. border, once known mainly as a summer tourist spot, has become perhaps the best representation of real estate action across the South Okanagan.
Osoyoos lies in the centre of Canada's only desert, and boasts its own climate zone of hot, sunny summers and mild winters. Osoyoos claims the warmest freshwater lake in Canada, as well as the lowest annual precipitation and highest annual temperature.
The real estate boom, characterized by a lot of condo construction got underway here four years ago and now the best deal in Osoyoos is resale lakeview condos. BUT, there is currently a glut. Since 2003, about 590 condos were built in town, many of them in large luxury complexes along Cottonwood Drive. Many of those bought by investors are now vacant due to rental restrictions under a recent town bylaw that restricts rentals to at least one month, not daily or weekly. (Watch for city meddling as an investor!)
Prices have plunged for some units and flatlined for most. Some units that sold for $575,000 in 2004 are on the market now in the mid-$400,000's. We found large 2 bdrm lakeview condos under $250,000 and older townhomes in town under $190,000. In some buildings units that sold for $229,000 were unloaded at 10%-15% reduction two years later.
The condo glut window is closing, though. In the first two months of this year, only 22 new multi-family units were started, down from 150 in the same period in 2005 and the second lowest level in six years. Right now is a prime time to take a close look at the view condo market. Most of the 3-4 year old units are large (1,200 square feet) and built exuberantly to a stainless steel/granite standard.
Houses have held their value better. Two years ago, the average price of a house in Osoyoos was below $200,000 and the town was testing the market with building lots priced from $95,000.
This month more than a dozen houses in Osoyoos are listed on MLS for more than one million dollars. There are only eight priced under $250,000 and half of these are in rural areas between Osoyoos and Oliver.
Building lots at the 6,000-acre Regal Ridge development where acreage lots sold for $88,000 in 2002, are now reselling for $220,000 and up for prime three-acre parcels with views. The problem for those planning to buy a lot and build, as in all of B.C. is a labour shortage and soaring costs.
Later this month, a new bare-land strata lakeview development of single-family lots will open called Sonora Ridge, a gated community. Fifty-foot lots run from $199,900 to $239,000, but they come with a building contract. (Owners have two years to build and assignment sales are not allowed.) Sales will be held from two show homes on the site, expected to open around April 30. The developer will build on spec if the lots don't sell, according to Norm Thomas, of Macdonald Realty, (1-877-495-7522) who is among those who will be selling Sonora Ridge.
Osoyoos is also known for its progressive and vertically-integrated First Nation Osoyoos Band, based in Oliver, that owns the award-winning winery, Nk'Mip Cellars, and a number of other businesses that net the 400-member band about $1 million per month. The Band takes in another $1.8 million a year from its Inkameep Canyon 18-hole golf course and RV park. The Band owns 32,000 acres that it leases for a variety of businesses, from the Sonora Dunes golf course to residential and commercial development. It also has its own construction and redi-mix company.
The Band also has a stake in Mount Baldy, the local ski hill that was bought by a trio of U.S. investors three years ago. This summer a new quad chairlift will be installed that will access nine new runs. (!!Quad means more skiers!!)
Mount Baldy is being developed into a four-season destination. Right now, Mt. Baldy has about 110 houses and 30 condominiums. The existing small village can accommodate about 30 detached houses, estimates Brent Baker, vice president of Real Estate at Mt. Baldy.
The resort sold out its mountain site Wapiti Subdivision - 23 building lots priced from $109,000 - early last year. Resale lots are currently listed from $175,000. A Master Plan, inked last spring, calls for a 7,800-bed village to be built in four phases. The village is designed so that 80% of the new development will be ski in/ski out and will (eventually) incorporate an 18-hole championship golf course.
With one of the highest base elevations in B.C. at 5,665 feet, the mountain has had consistent skiing conditions and an annual snowfall of over 20 feet.
Bottom line: For those looking for a retirement home or a buy-and-hold situation, Osoyoos lakeview condos are now a relative bargain. Note, though, that the all-season rental market is soft and the higher-end condo rental market is glutted. The upside, with great golf, and the expansion of Mount Baldy looks good. If you can find one ... older motels in the area are a hot commodity right now, because of the restrictions on short-term residential rentals.
Oliver, population 4,300, is located near the south end of the Okanagan Valley, a short drive east of Osoyoos. It fronts the Okanagan River and has a slower pace and lower real estate prices than Osoyoos. Newer detached houses are in the $290,000 to $342,000 range, but there are older houses priced lower. Oliver has only had two condominium projects built. The latest, Casa Rio, has four units left, and are well priced at around $189,000 for 1,000 square feet two bedrooms. The town and private developers have plans for a "wine village" on the town's riverfront site of an old RV park, indicative of the many wineries in the area. There are two good golf courses. "We are seeing a lot of retired persons, from both the Lower Mainland and Alberta," said Mary McCarthy of the local Re/Max Wine Capital Realty (250-498-6500). Oliver is not a landlord destination. Two bedroom apartments rent for around $525 and houses for $700-$800 a month.
Keremeos is a 5 hour drive from Vancouver; 40 minutes south of Penticton; 40 minutes west of Osoyoos and the American border; and. 1.5 hours from Kelowna. Primarily a fruit and farming town of about 1,200 people, mostly perched with views of the Simalkameen River. The lure here is low cost retirement homes and acreage parcels. You can buy 40 acres of steep raw ALR land overlooking the river for $85,000; a riverfront fruit orchard on six acres ALR sold this month for $349,000 (Re/Max Keremeous Real Estate 250-499-0012). About half the village is on sewer lines, the rest on septic. There is a golf course and it is close to the Apex ski hill. There are half a dozen smaller (1,200 square foot) older detached houses in the village for sale under $250,000. Two new duplex-style strata projects are selling in the $194,000-$216,000 range for 1,100-1,300 square feet, one of them is a gated community.
Okanagan Falls (recommended here in 1996), 174 miles east of Vancouver and 428 miles west of Calgary, is situated on the shores of Skaha Lake and is in the southern heart of the Okanagan lake district. The Okanagan River is also here in this pretty town of about 6,000 that offers good beaches, golf and terrific view property. A major attraction is the trestle bridge that connects to the old Kettle Valley railbed.
Inflation has caught up with Okanagan Falls and the prices here begin to feel the heat of the central Okanagan. Figure on at least $300,000 for nicer detached house and condos in the $190,000 range. There are many substantial new homes priced above $800,000 and the town is attracting a mix of seniors and young families. A new sports field opens this summer, but there is no swimming pool. Okanagan Falls is not overbuilt as yet and looks like a promising market. Prices are generally about 20% below Osoyoos and 25% below Penticton.
Penticton - population 42,000 - is the key city in the South Okanagan. Framed by two lakes and situated at the centre of the region, it is in the seventh year of a housing boom.
The average Penticton detached house in March was $374,960, the average condominium apartment sold for $229,918 and the average townhouse price in March was $269,943, up 20%, on average, from a year ago which was the third straight year to see double-digit price increases.
"We will see double-digit price increases for detached houses in Penticton this year as well," said Paul Fabri, regional analyst with CMHC.
(Remember those old low-priced cottages that we recommended buying here two years ago for $125,000. They are now $250,000, minimum, if you can find them. Do you remember our townhouse recommendations at $80,000 in 2001?)
The condominium market shows no sign of a glut. In a survey taken in March, CMHC found only 10 new and unsold condominiums, though starts have averaged nearly 400 units a year since 2003. CMHC estimates that 73% of the 380 condominiums now under construction in Penticton have been pre-sold. Prices per square foot range from $300 for standard units to $500-$600 for luxury condominiums. The official CMHC apartment vacancy rate is 1.8% and rental rates are rising. As for the MLS resale housing market, it set back-to-back records for sales in 2005 and 2006 and no one we talked to sees any sign of it slowing down.
A sleepy Okanagan Lake village with a great beach, tiny Naramata has seen rocketing price increases. "If you can't afford Penticton, you can't afford Naramata," said realtor Julius Bloomfield of Re/Max Front Street Realty in Penticton (250-492-2233). Example: 1/3 acre of lakeshore with an old cabin is priced at $1.5 million. Newer lakeview house, close to the village: $597,000. You can find the odd older rancher in the high $300,000's. Bloomfield said a characteristic buyer is a family from North or West Vancouver or Alberta looking for a summer vacation home. (In our "Plot of the Week" in the late 90s we featured many 10 acre parcels under $100,000 here!)
Summerland is a pretty town of 12,000 people on the shores of Lake Okanagan, right across from Naramata and about half-way between Penticton and Kelowna. It has good beaches, golf and civic amenities. Prices have risen at least 15% annually over the past three years and even older ranchers in town sell close to $300,000.
There are some new subdivisions sprouting that give an idea of lot and new house prices. Rock Gardens (Tammy Anrobus, 1-888-494-8881) about 2 km from town has valley view lots at $119,9000-$129,900. A new house will add from $220,000 to $350,000 to this price. Lakeview building lots are in the $180,000 range. Summerland is close to major alpine and cross-country ski courses: Apex Alpine Ski Hill, Crystal, and Big White. The new Summerland Waterfront Resort is a fantastic facility lifting up all Summerland real estate.
All of the South Okanagan is a good future buy. While it seems to take a breather, it is boomer country. The first wave of the baby boomer retirees are just hitting the market now and many start to wonder whether the prices in Phoenix are really worth it. The South Okanagan has one more month of summer and one month earlier spring.
Published in West Coast Homes + Design, May/June 2007
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