City more affordable than you think

Central 1 Credit Union chief economist Helmut Pastrick, left, was the guest speaker at Thursday’s Urban Development Institute lunch at the Coast Capri Hotel. He is joined by Rich Threlfall, chair of the institute’s Okanagan branch and the vice-president of development at Troika Groua, and branch director Kevin Santos, an accountant at Grant Thornton.

Maybe Kelowna is more affordable than the doomsayers say.

Kelowna routinely shows up as the fourth most expensive housing market in Canada behind Vancouver, Toronto and Victoria.

That’s led many to declare the city as unaffordable.

But Vancouver-based economist Helmut Pastrick from Central 1 Credit Union rolled into town Thursday with some contrary information.

“(Canada Mortgage & Housing Corporation’s) core housing need assessment shows that 10.2% of Kelowna’s population is living in a home that’s unaffordable, unsuitable or inadequate for them,” said the economist.

“Unaffordable means more than 30% of household income is spend on housing, unsuitable means the home is too small for the family and inadequate can mean a home is in poor repair.”

The core housing survey shows Toronto is the most unaffordable city in the country with 19.1% of its population living in unaffordable, unsuitable or inadequate conditions.

Vancouver is the second most unaffordable at 17.6%.

In fact, Kelowna is in the lower third of the list of about 40 cities across the country.

Cities with lower house prices and lower rents, such as Peterborough, Hamilton and Halifax, rank as more unaffordable than Kelowna based on the core housing need criteria.

“I think this is good news for Kelowna,” said the economist.

“Housing unaffordability is not as severe as many think and many other cities are more unaffordable.”

Kelowna is more affordable because it has an older population, higher-than-average household incomes and high percentage of homeownership.

“An older demographic usually means wealthier homeowners,” said Pastrick.

“If you own your own home, you are sitting on wealth.”

Higher-than-average incomes mean while home prices, and thus mortgage payments, and rents are heftier in Kelowna, people can still afford them.

Kelowna’s lifestyle and location tends to attract young retirees with money, entrepreneurs, the well-educated and people who make above-average wages.

“The unaffordability issue is more prevalent in rentals because it’s generally people with lower incomes who have to rent,” said Pastrick.

“Unskilled workers, single parents and seniors on a fixed income can fall into this category.”

Kelowna’s rate of home ownership is 75%, rentals 25%.

In Vancouver, it’s 66% homeownership and 33% rentals.

The average price of a single-family, fully-detached home in Kelowna is $682,000, down from a record $780,000 in boom time July 2018.

The average price of a townhouse is $500,000 and a condominium $318,000.

The average monthly rent for a one-bedroom apartment in the city is $1,340, a two-bedroom, $1,600, the eighth and seventh most expensive, respectively, in the country.

Despite the perception of unaffordability in Kelowna, people will still stay and move here, the population will grow, more homes will be built and the economy will flourish.

Over the next 22 years, Pastrick predicted Kelowna’s population will grow by 35% and the number of households will increase by 40%.

Over the same period, average house prices and rents will increase by 50% or more.

The construction trend will be more townhouses and condominiums as people choose more affordable, closer to city centre and lower-maintenance alternatives to a single-family home in the suburbs.

After a couple of years of declines in home sales, construction and prices, Pastrick is forecasting increases in 2020.

Home sales should escalate up to 10%, home construction starts also up 10% and prices could see a 4% bump.

Pastrick predicts the Bank of Canada will cut its benchmark rate twice in 2020 leading to lower mortgage interest rates and housing stability.

“The normal state of the economy is growth because of entrepreneurship, innovation and efficiencies,” said Pastrick.

“Next year and 2021 should be no exceptions with 1.5% and 1.7% expansion, respectively.”