Trends, Shifts, and Purchase Dynamics
Piggy backing on the mid year analysis, this week we are looking at another opportunity to analyze the homebuyer landscape so far this year to help see the current trends in the real estate market.
The most notable trend in the 2023 real estate market is the an increase in local buyers. With 62% of purchasers originating from the Central Okanagan, there has been an 8% shift compared to last year where 54% of the buyers were within the Central Okanagan area. This suggests a growing preference for homebuyers to invest in their own communities.
These buyers for the most part have been a relatively healthy mix of what type of properties they are moving to with similar type of properties at 21%, 18% first-time byers, 17% downsizing and 16% moving up.
Meanwhile, the proportion of buyers from the Lower Mainland has slightly decreased from 21% in 2022 to 19% in 2023. This change could be attributed to various factors, including the relative attractiveness of local properties and adjustments in market conditions between the two regions. With the prevailing higher interest rates, the feasibility of purchasing rental properties has been affected. In 2022, 14% of buyers invested in rental properties, but this figure has decreased to 11% for the first half of 2023. The higher borrowing costs may have contributed to a more cautious approach among potential investors, prompting them to reevaluate the profitability of rental property investments which likely could explain the slight dip in Lower Mainland buyers as well.
With the interest rate increases in the last year 37% of the buyers have been relatively unaffected buy the rates hurting their pocket books. 37% of buyers have indicated that they are using all cash to purchase the home. This trend demonstrates the influence of financially strong buyers who can afford to buy without relying on mortgage financing and is a sign of a relatively healthy mix of market and as a lot of equity is out there in the last few years this trend likely will continue.
Conventional mortgages remain the primary choice for 51% of buyers, indicating that the majority of purchasers still find traditional borrowing methods accessible and suitable for their needs. Meanwhile, high ratio mortgages account for 12% of total buyers, which in my opinion seems to be low with how high prices have increased in the last couple years. But now that average prices are over $1,000,000 which is the threshold for buyers needing to put 20% down(over $1M needs 20%, under $1M can be insured mortgages and minimum 5% is needed). As we analyze the homebuyer landscape in 2023, it's evident that local buyers have become a more active in the market. The impact of higher interest rates on rental property purchasesis apparent, with a drop in investor interest in this segment. However, cash purchaseshave emerged as a robust driver, showcasing the strength of financially soundbuyers. As the year progresses, these trends may continue to evolve, shaping the dynamic Kelowna real estate market. Hope you have a great week! Reach out if you have any questions! -Mark and Maddie