Local Real Estate News - The Sky is NOT Falling!

A Castanet Real Estate Story contribution - May 8, 2008

After my last column I exchanged a few emails with a reader who was querying the most recent board stats. I had heard rumours that the sky is falling (again!) in the Okanagan and look at the Board stats. On reviewing the stats, I did not see anything else other than an affordability issue and lack of inventory in the lower levels of the market place (sub $400,000) and above that, I saw an active market that was running approximately 12%-115% up on last years comparable numbers in most of the pricing categories. Well, thanks to Dan who reads the column regularly and who did a fantastic amount of research and number crunching, he came to the same opinion also. Thank you Dan!

It remains to be seen what will happen for the rest of the year, but when oil is running at $120-$130 per barrel and natural gas is now trading in the $11 range, one might expect that Alberta’s resource heavy market place might be purchasing some more real estate this year, despite the state of the housing market in some parts of Alberta.

So far we are seeing some typical spring trends with waterfront buyers starting to show up on weekends and by all accounts, the slightly increased amount of listed inventory is still not satisfying the buyers tastes very well which will buoy prices in this slightly sluggish market.

Recreational Property Financing

Two notable areas of change in the finance markets are development project financing and recreational real estate financing. In many instances, complicated title arrangements ensure that a main street bank may shy away from financing a recreational purchase. This alone is very good reason for developers to work with Realtors prior to the launch of their product since the inclusions in the disclosure statement can be restrictions to retail financing. While many recreational purchases are made with existing home equity, some purchasers prefer to actually mortgage their property. Recently we have been referring some buyers to a unique product that allows purchasers to access self directed RRSP funds to acquire recreational property.

Several years ago, I wrote an article titled “FUN-vesting”. It was published in a journal called the Canadian Rockies Resort Forecast and it talked about the ability to buy recreational property using RRSP funds. At that point in time that was no easy feat for the developer with several layers of bureaucracy and legal filings required prior to sale and complications on the back end with bank financing!

Last year I had the pleasure of meeting the President of a fund that will organize the ability for you to move self directed RRSP funds into a bond that will then lend you the money for your purchase at a reasonable mortgage interest rate while also depositing a bond level of return into your RRSP account. Our clients have so far been very happy with the results and with the stock markets continuing to be as volatile as ever, it makes sense to many people to move their investment into real estate. Once the Harper government follows through on it’s commitment to remove any capital gains on real estate investments, you can expect this very popular product to really take off.

Planning Kelowna 22 Years into the Future

Officials in booming Kelowna are already building for the much larger city it will have become by 2030.

CATHRYN ATKINSON Special to The Globe and Mail, May 3, 2008

KELOWNA -- On a hilltop above Okanagan Lake sits the 19 Greens Putt & Play Zone. Billed as a "putter's paradise," it features two 18-hole minigolf courses with a $1-million vista overlooking mountains and directly across the water from downtown Kelowna. It's the sort of family-friendly outfit that rakes in the holiday crowd every summer and makes the Okanagan so attractive to so many.

Andy Bleile, the caretaker for 19 Greens, was born and raised in Kelowna. Now 65, he can remember when there were just 15,000 residents. At that time, in the early 1950s, he said, the only way across the lake was to ride the ferry his father operated before the first bridge opened in 1958.Mr. Bleile is sipping a coffee and watching the builders below as they put together that first bridge's replacement.

"That there is the biggest skateboard ramp in B.C.," he said, gesturing at the almost completed William R. Bennett Bridge. The $144.5-million project is a long overpass that dwarfs the worn-out floating bridge beside it and promises to become either a new gateway into Kelowna or a new congestion flashpoint.

The corridor between the town of Westbank - where 19 Greens is located - and Kelowna is already the busiest stretch of road in B.C. outside the Lower Mainland. Around 46,000 vehicles will cross it daily after it opens in late May. In nine years time, according to the B.C. government, there will be 69,000 crossings a day.

Kelowna is in the middle of unprecedented growth. More than 8,000 people a year are currently moving here, drawn by the promise of a four-season playground with big-city conveniences. The 2006 census pegged the population at just under 107,000, with about 55,000 more in the surrounding region.

Apart from congestion, there are other stresses. The local hospital, while undergoing an expansion, has had frequent cancellations of elective operations and procedures because of too many emergency cases taking up bed space. There are concerns over water supplies and the possible loss of agricultural land to urban sprawl.

Local politicians believe Kelowna will double its population in less than 25 years, and are currently seeking high-density solutions, particularly in the form of a redevelopment scheme in the city's core. The Downtown Plan has 13 high-rise towers - some up to 30 storeys tall - in a four-block area, plus commercial, office and retail space on the ground floors.

The plan is due to be presented by architects next week at a public meeting. The process is at the rezoning stage, with actual construction several years away. Growing up, instead of out, is a new concept in Kelowna, but the Downtown Plan also promises affordable housing, public park spaces, cultural centres and the preservation of nearby heritage buildings.

Sharon Shepherd, Kelowna's mayor, won her 2006 campaign in part by promising such changes. She said the downtown plans are just one of four high-density areas first proposed for the city 12 years ago. "The process has been slower than we've anticipated. There are 6,000 units due to be built in the downtown core and we are a long way from achieving that," she said. "That is still in the public process and hasn't yet come to council."

Ms. Shepherd said pressure from some developers for projects around the city has been intense, with those in the greatest hurry wanting to speed up the permit process by offering to pay for and install their own infrastructure systems. She said the dozens of proposals have bogged down city staff, and added she hoped the current downturn in the broader housing market would have some impact on Kelowna, just to give the community some "breathing room." "I look all over the city and in every quadrant there is very large activity taking place," Ms. Shepherd said.

The high-density solution is just part of a 22-year urban plan for Kelowna announced this year, called Kelowna 2030. Ms. Shepherd said council was seeking ideas and comments from the public on how they'd like to see it proceed. She said the city started to lose its sleepy feel in the 1980s, when the Coquihalla Highway opened and Vancouverites could reach the Okanagan by road within five hours.

More recently, cheap 40-minute flights from Calgary and Edmonton have also proved an attraction for Albertans looking to splash oil wealth on Okanagan properties. The opening up continues with the expansion of the runway at Kelowna International Airport, allowing for direct European flights starting later this year. All this, Ms. Shepherd said, means the wealthy set is moving to Kelowna to enjoy the sun, skiing, sailing and wine, in detached homes that cost an average $496,000.

While local young people are enjoying a newly vibrant job market, they are unable to find affordable housing. With a zero vacancy rate, rentals are also elusive. The mayor's own daughter, who recently moved home after living in Montreal, had similar difficulties. "I was very excited that she was hired on the spot. The challenge we've encountered with her is housing affordability," she said.

The council decided more than 20 years ago that it was going to accept the big-box stores that come with car culture and urban sprawl, and Kelowna has become a commercial hub for the whole Okanagan, Ms. Shepherd said. She added that she has heard frequent complaints about the look and congestion of the main traffic artery, Highway 97, where most of these stores are located. She said she didn't expect the strip to take on any more big boxes. "We have every box store there is, except for IKEA," Ms. Shepherd said. "At this point, though, I don't think there would be any other big boxes coming here. We've got them all."

Ron Mattuissi, Kelowna's city manager, said the housing market has started shifting naturally toward multifamily condos and townhouses. "We were saddled with an ugly highway strip that always gets mentioned, so we looked at that and decided to place developments in and around the area to get residents out of their cars," he said. Mr. Mattuissi said it was difficult to place restrictions on the actual number of developments in the city because people would still move there, pushing property prices even higher.

"Seeing this growth rate happen in a mid-size city gives us the chance to try things that are being done in larger urban centres," said Mr. Mattuissi, who previously worked in Edmonton's planning department. "When you look at who is moving here they are fairly urban people. Cutting a half acre of grass or pruning an apple tree is not their priority, but they still want to be close to a Starbucks."

In the Costco parking lot on Hwy. 97, Margaret Buchanan and Mark Yip are loading up their car with bulk produce. The couple, in their 30s, moved to Kelowna two years ago from Ontario and are playing out Mr. Mattuissi's analysis as though he'd written a script for them. "We couldn't find a place to rent so we stayed with friends," Ms. Buchanan said. "What the housing situation did was motivate us to focus on buying something that much quicker." They bought a condo together and are currently trying to decide whether they can afford to upgrade to a detached home.

"We'd have very little income left at the end of the month," Mr. Yip said. "The whole point of us leaving our Toronto jobs was that we fell in love with Kelowna, and it would be good to have some money left to enjoy it. But it was the right decision to come, and it's not like we've never seen a traffic jam before."

None of this pacifies John Zeger, a retired Edmonton urban planner who, by coincidence, once worked with Mr. Mattuissi. Mr. Zeger founded Citizens for Responsible Community Planning after moving to Kelowna five years ago. The group would like to see the annual growth rate in Kelowna cut in half by restricting the number of planning permits given to developers. "We're against the Vancouverization of Kelowna," he said, referring to the high-rise condominiums that dominate Vancouver's skyline. "I don't think those structures are appropriate for Kelowna, given the beautiful natural surroundings we have." But sprawl, he says, is also not the answer. Instead, he'd like to see the city limit building heights to about four storeys.

"The priorities that our city council has set are really out of whack. The redevelopment of downtown, with 13 high-rise structures in four blocks, is totally out of keeping with Kelowna's character. ... I thought I'd left all of this behind when I left Edmonton."

A vision for Kelowna?

The region around Kelowna echoes the city's growth patterns, as Canadians and foreign residents seek Okanagan homes. Westbank, Kelowna's largest neighbour across Okanagan Lake, has undergone its own rapid expansion. According to the 2006 census, Westbank's population was 28,972, a rise of 11 per cent in five years. A further 28,000 residents live in the remaining Greater Kelowna area.

A referendum in June, 2007, saw Westbank residents reject amalgamating with Kelowna by 342 votes. As a result, the District Municipality of Westside, incorporating the town and smaller communities nearby, came into being in December, 2007. On Nov. 17, 2007, Westbank residents elected Rosalind Neis as the district's first mayor. Ms. Neis ran on an election platform promising to disincorporate the new community and join Kelowna. Five of her new council colleagues disagree. Observers say the issue has not yet been laid to rest.

Two of Westbank First Nation's five reserves border Okanagan Lake and are in close proximity to Kelowna. The nearby Westbank First Nations reserves Tsinstikeptum 9 and 10, are home to numerous developments.
SOURCE: wfn.ca (Westbank First Nations), Statistics Canada, http://www.westside.ca (the District of Westside)

Kelowna 2030

Kelowna 2030 is the latest incarnation of the city's Official Community Plan, first brought forward in 1996 to define policies for land use and development. Subtitled "Greening our future," the 2030 OCP will take sustainability and "Smart Growth" as its mantras. Public participation has been deemed essential by officials. Residents can complete a survey on Kelowna's future, attend frequent open houses over the next six months, or write in to voice their opinions.

The review of the OCP started in late April and is due to be completed in October, when the new OCP goes to Kelowna Council for debate. It absorbs the recommendations already being carried out in Kelowna's 2020 plan, which was deemed to be too short-term to accommodate the needs of the 8,000 new residents moving to the city each year. By taking a long-term view of population projections, Kelowna 2030 hopes to determine how many new homes will be needed, and of what type, over the next 22 years.

Kelowna's council and staff plan to use the 2030 OCP to advise developers, planners and architects as to what the community wants as it relates to the delivery of housing and other land uses, transportation services, infrastructure and amenities. Environmentally sensitive areas, steep slopes, hazardous areas, will also be mapped out. The public can use the OCP to gain a better understanding of local issues - how they will be addressed and how their neighbourhood may change.

Densification of Kelowna's core is a key platform of the OCP and one of four high-rise focus points around the city. The Downtown Plan calls for 13 condo towers, some soaring to 30 storeys, in a four-block area near the new Bennett Bridge across Okanagan Lake.

Opponents say the Downtown Plan will adversely affect the character of Kelowna by destroying the natural beauty of the city's setting - proponents counter that it is essential to build affordable condominiums that will revitalize the downtown and cope with the influx of newcomers.