An end to Kelowna's boom and bust real estate
After a generation of ridiculous housing prices, where profits soared, then homeowners saw their value dissolve within mere months, the development industry is tossing around a new word: stability…
A healthy real estate market may sound like a pipe dream to those who have lived in the Okanagan for years, but this is the current scuttlebutt in the development industry.
Crack open a newspaper, listen to the radio, pick up your mail and it’s very clear—development is on the move once more. From condos to single-family homes, commercial buildings to resorts, the talk, at the very least, feels promising.
“I think there’s a market,” said Kelowna city manager Ron Mattiussi. “…I think we’ve used up some supply and we’re starting to build. The recession has passed and all those things are starting to work for us.”
From the traditional prairie migration to build-out of the university, the tertiary health care model making Kelowna General Hospital a medical mecca to the announcement of the new downtown Innovation Centre and the rapid expansion of the airport, the city manager believes Kelowna will see steady growth moving forward.
Talk to the developers and you’ll hear more of the same.
Rather than zealous, fast-paced moves to slap up condos, they’re dusting the cobwebs off large neighbourhood plans mired in economic collapse and the last Official Community Plan process.
“Even historically, when you look back at the height of the market in ’07/08, over 60 per cent of purchasers were Okanagan residents,” said Andrew Gaucher, of G Group Developments.
On July 18, his company released the first lots for a neighbourhood of waterfront bungalows in McKinley Landing targetted at locals. A far cry from the grand resort development originally planned for the property, they’ve designed lots with a maximum 400-square foot lawn and waterfront view where homeowners are restricted to indigenous xeriscape plantings intended to totally renaturalize the hillside within a few years.
Aimed at middle-income earners, G Group is expecting buyers will put out $500,000 to $700,000, once they’ve purchased their lot and built. It’s a low price point for waterfront access with an extensive neighbourhood trail system.
“If you drive to the Upper Mission, like the Quarry, 85 per cent of the backyards are empty and they cost a lot to maintain,” said Gaucher, noting McKinley Beach will focus on lakeside barbecues with plenty of parks.
This is the end of the road on several sets of plans, which could see everything from UBCO to downtown Kelowna, Clifton Road to McKinley Landing built out if buyers catch on.
Melcor Developments owns the swath from Clifton to McKinley and it’s primed to slice it up with the first 40 lots likely to sell in the fall of 2015. Currently working this project, and Blue Sky at Black Mountain, Melcor was among the lucky few to keep building through the recession years.
“Single-family has always been trickling along,” said Andrew Bruce, Melcor Developments’ regional manager. “What happened in 2008, I think, was driven mostly by condo development and speculators. I was working for a different development company back then and we were building that kind of product. It completely killed the development market for larger three or four-storey, apartment-style buildings because there was just so much inventory out there it was getting tougher and tougher to get your financing.”
Developers switched to townhouses, servicing the same condo buyer, at depressed prices, with less out-of-pocket risk for the company. Condos have yet to make a comeback. While The Monaco, a set of towers slated to be built in front of The Daily Courier building downtown, is supposed to begin construction in September, the City of Kelowna has to receive a development permit application for it to get underway; the deadline is next week and the planning department has heard nothing.
The Monaco is the first major condo proposal to come online in several years in the downtown core. Many proposed projects—Lucaya on Sunset Drive, 24 on Bernard Avenue—never materialized.
The development permit has now expired on 24 and the project has been scrapped, but appetite for this style of housing is starting to materialize. A 343-unit townhouse and condo buildout planned for the base of Dilworth, near the end of Enterprise Way, received the thumbs up from council at public hearing this week, and Argus Properties has a development application to start the process for what could be the highest building in the downtown core—a hotel, office and condo complex at Manhattan Point and Sunset Drives. It’s proposed for 27 storeys.
Kelowna city planner Ryan Smith believes next year could be the turning point for condos.
“It’s still to come,” he said. “We’re still soaking up inventory, but I know we’ve certainly had people acquiring land and starting to make the moves.”
Melcor, meanwhile, is part of the new Thomson Flats housing subdivision being drafted for the South Mission. They’re selling the second phase of Blue Sky at Black Mountain and polishing the last touches to launch sales for their lots in North Glenmore.
“The demand was so slow through ’08 and ’09, right through to maybe a year ago, I think there’s now just this pent up energy,” said Bruce.
In Black Mountain, his market is Rutland residents who want to move up the hill. Blue Sky attracts the attention of those trying the new global commuter lifestyle—live in Kelowa, work up north. Compared with Golden or the Kootenays, Kelowna’s airport is a dream with easy access to work and just a 15 minute drive home to Black Mountain or North Glenmore.
The company is targeting a similar market for Clifton. Some 2,500 people work at the airport, it’s a quick drive down the hill to the downtown core and Pandosy corridor for tech workers, doctors and nurses.
On the other side of the Glenmore Valley, Renee Wasylyk, principal of Troika Developments, introduces Diamond Mountain to the public starting this Tuesday. This is a 1,400-home "live, work, play" neighbourhood just south of John Hindle Drive and less than two kilometres from the university.
Parked beside the university endowment lands, it was originally purchased in 2006 and would have competed for the Kettle Valley customer had it stalled as the city completed its three and a half-year Official Community Plan process. Cities don't like major development proposals to come through for an area that isn't planned so these processes can waylay a project. In this case, the developer isn’t complaining.
“We see the market as quite robust and coming into a more robust time frame,” said Wasylyk.
Under the leadership of deputy vice-chancellor Deborah Buszard, Wasylyk believes UBCO flourished beyond all expectations, leaving room for a Kitsilano-style development at its door where the students, tech and health care workers, professors and airport staff will generate energy.
Planned in the West Coast contemporary style, with long roof lines, perfect for the solar hot water and electric systems they’re including in the design guidelines, it’s pitched at a forward-thinking crowd.
Will the market flood with all of this new home potential? The development minds of this town think not.
Moving slowly with lot releases, buyers will decide whether suburban-style neighbourhoods are their pick or downtown condos, which neighbourhoods will thrive and which will remain lines on the city’s books.
The city manager believes the baby boomers are finally going to retire and likely to downtown or city-centric condos, as predicted. The sunbelt investors who took to the depressed American market, snapping up Arizona ranchers at steals of deals, have largely returned. Complications of cross-border real estate shopping, a lack of universal health care, the fall in the Canadian dollar and a post-recessionary boost down south have made the snowbird surge less interesting.
Kelowna today is what a healthy, thriving city looks like, the development community says. As the city manager puts it: “Cities get to a certain size and there’s a kind of inertia."
Photography: (a) The view from McKinley Beach, a new development in McKinley Landing, on sale since July 18; (b) an aerial photograph of The Diamon Mountain site, a planned neighbourhood Troika Developments introduces to the public on Tuesday, Aug. 5; (c) (e) sketches of the McKinley Beach bungalows and the naturalized landscape the community is based around; (d) a rendering of The Monaco, a twin tower development Premier Pacific Group is supposed to begin building next month, although city officials say the company has not filed the requisite paperwork. Inset: (a) City manager Ron Mattiussi (b) Renee Wasylyk