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Interest Rates Go Up

July 12, 2023 - The Bank of Canada has raised its interest rate by another 25 points to 5 per cent, right on the heals of June's rate increase. While this wasn't unexpected today, many are wondering how this will affect the real estate market moving forward.

New Developments

If the Developer has not yet reached their pre-sale requirements, we could start to see an increasing number of developments being shelved or paused for as many pre-sale buyers will be more cautious due to higher rates.

For those developments that are really close to their presale target, there may be some great incentives offered so they can achieve their final presale target and move forward.

Developments under construction will already have presale requirements met, and buyers already know their timeline for completion. Buyers will want to ensure they have a rate hold, if they don't already.

Spec-homes could also be a great opportunity for buyers right now as we could start to see some flexible pricing and quick-close options come up. As builds near completion, most builders would prefer not to hold the property for too long, incurring carrying costs.

Resale Homes

Don't expect to see a big change in home prices right now. Most people hold a 5-year mortgage, so most mortgages being renewed right now are from 2018/2019, and their new rate could be double or more. The stress test allowed for a 2% higher rate; however, we're not seeing 3+% increase in rates. Most homeowners who need to sell may not see big profit from the sale (depending on when they bought, or how much equity they've pulled out of the home).

While buyers might be thirsty for a good deal right now, it's unlikely that you'll be seeing a market crash and an abundance of deals and price drops anytime soon. There's a lot more at play in the market than just the interest rates. For instance, Kelowna has been encouraging growth of the downtown core and restricting new single family subdivisions. Newer single family homes will be in shorter supply which could help push the value of that market segment in general. There's also a lot of construction for multi-family communities (both rental and owner-occupied) which will bring inventory to both the real estate and rental market in coming years. But, our population continues to grow, too.

Call me to chat or grab coffee to talk about the market if you're looking to buy or sell.



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