British Columbia Market Update

AJ Hazzi

AJ: Thanks, Alfonzo. And what an awesome crew of speakers you've had so far, I'm learning tons here. And I'm really glad I was able to join you guys. I'm going to keep it fairly brief, but then you've got lots to get through. But BC, the market here has been really exciting. It's not been 20 offers on every property going a hundred thousand over list. Like you guys have been seeing. It hasn't been in that sort of two to three months worth of inventory. A tight sellers market, but sellers are getting what they're asking, but not typically going over ask.

There's still room to do deals and to negotiate, you don't have to be all cash. You can still make offers under the list. And you can have conditions and inspections and the normal pace of play. That part is nice. Sales, however, in Q3 we're up 63%. That speaks to the demand. Our average sales price this year has gone up by 15%. And that's just by having the March, April, May numbers were pretty shabby.

This market has really come back full swing. BC overall is up 25%. The Okanagan Valley where I'm from, is seeing an even more concentrated uptick. And the reason for that is, there's this behavioral shift that's taking place. Now, a lot of people are talking about what happens on the other side of COVID and looking at it like the other side of it is obviously recession.

I thought that too, in fact, that to put an article saying that, when this pent up demand comes through the pipeline, we can expect it to soften and to the degree that it would probably become a buyer's market. But what I didn't anticipate was the behavioral shift. This cocooning effect that's taking place since COVID.

Everybody's looking for space to look for land. I just ran the numbers. The average transaction in Kelowna is 350 square feet larger this year than it was the same time last year. Now, that's a pretty big jump. That's about a 15% jump in square footage. The average transaction value, not the like. The home price index increased, but the transaction value went from 550 to 750.

That's about like almost a 30% change. What that means is that the single family market is outpacing the Pandos, which is fairly typical across Canada of people moving from Vancouver, which is our big primary market. And they're cashing out a $3 million home there and they're buying either coming straight to the corner and buying a $3 million house there that's three times the size and has three times the land or they're buying a nicer home. They even had in Vancouver for 2 million, putting a million in the bank or a million into investments and finding themselves with a view, a pool.

They're staring at the lake and over the vineyard in Kelowna. We're seeing a huge trend: sales over a million dollars in the valley are up 300%. It's definitely skewing to the higher end. And again, I think that's the cocooning effect. What happens though is when that much sales volume increases, you get the economy, the economic benefit from that is just so massive. I don't know that I see it slowing down the Okanagan next year anymore, because I think this trend of people moving to Kelowna is going to continue.

The fact that now people are working remotely. And I agree with Harry that no, we're not going to see the end of commercial real estate, but we do, we are seeing the beginning of the remote worker and that person is going to look for a four season lifestyle. They're going to look for, where can I get my family situated, where it's relatively affordable. I've got a beautiful surroundings and the lifestyle that I want and Kelowna for most people who Google best place to live in Canada, it's on that list. I'm not saying it's the best place, because it would be most people who think where they live is the best, but it's certainly on anybody's list or one of the nicest places to live.

We're going to continue to see that in migration. And our rental vacancy rate is still under those downward pressure, rents are still going up. Our inventory has been declining six months in a row. Like I said, we're at 2.3, three months worth of inventory now, and it's getting tighter and tighter. I don't see a quick reversal of that anytime soon. I think we're through pent up demand. I think those may be strong too. Now, what strategies are you working? I mentioned, I'm working with a bunch of accredited investors, sophisticated folks to purchase stuff for cash.

You can come to our website and you can get an instant offer on your home. It's all cash. And then we fixed them up and we turned them into rent to own opportunities because the lending market's still fairly tight and people are having a hard time. Getting onto the property ladder. We're finding rent to own, still a great strategy to get the cash flow where it needs to be to offset the higher prices. And obviously, they've got skin in the game.

That was all the reasons that you know very well. If that rental is a great strategy. We're marrying the instant cash offer with the rental and strategy, combining them. To get excellent returns and a really nice margin of safety in these properties. The other strategy that's working well for investors, if they want to take a run at a small development is we have new zoning. It's called RU7 zoning, which allows four dwellings on a regulars infill lots of 50 by 120 lots, would allow you to build or construct for individual homes.

These properties will sell for about 600,000 each. You can make it. And they were from three to 400,000 in development profit on one of those that needed a little bit of deeper pockets, obviously to do one of those that you'd have at least probably 500 K liquid to do a project like that. But those tend to be a fairly good pathway to getting a foot in the investment side of things in Kelowna. That's the update.