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No Housing Shortage Relief in Sight
The Okanagan area has seen a major decrease in the number of permits issued for building projects. In the first seven months of this year, there was a 32% drop in the number of permits compared to before. This suggests that there might be a 40% decrease in building new homes soon. This will lead to stronger competition for existing homes, which might lead to a continued stability in housing prices even with the rising interest rates.
The Central Okanagan division of the Canadian Home Builders’ Association recently underscored the pivotal role played by residential construction in bolstering the local economy. In fact, residential construction surpassed other key sectors in terms of economic contribution in 2022, registering an annual impact that exceeded $2.5 billion. This surpassed the economic impact of high-tech industries and tourism. A 40% slowdown could have a significant economic impact and reduce local wages.
The prevailing housing crisis goes beyond a simplistic supply-and-demand analysis. Despite a high demand due to housing shortages, there’s a significant decline in construction happening. It’s a bit paradoxical.
There are several factors causing this situation. Land costs are going up, the expenses for materials used in construction are rising, there’s a lack of available workers, and interest rates are unstable. All of these challenges combined are making it really difficult for builders to start construction projects in the Okanagan, especially ones that focus on creating affordable housing solutions.
The good news locally is that not all developers have abandoned their development projects and are continuing to move forward. A prime example of this is Edgeview at the Ridge. Phase 1 will be completed by the end of September. Phase 2 has been started with a projected completion date of fall 2024. Phase 3 will be started promptly and is expected to be completed in early 2025. Parallel 50 is a local developer that is continuing with their construction and development plans despite some of these new hurdles to help combat the current housing crisis.
