Foreign real estate investment driving purchases in Kelowna

Foreign investors have recently taken a keen interest in Kelowna real estate, dropping big bucks for commercial properties in the city to take advantage of high capitalization rates.

A new report from Kelowna’s HM Commercial Group explores the impacts foreign investors, particularly those from Asia, are having on the city.

According to the report, the past year and a half has seen a “significant increase” in investment from foreign buyers, as Asian investors have snapped up several major properties in the city.

Among some of the major purchases are the former Monaco multi-family site, which was sold for about $6.5 million via court order, the 125-room Lake Okanagan Resort, which went for more than $10 million, and a commercial property on Bertram Street that sold for $2.4 million.

“Asian investors are also actively pursuing wineries and golf courses throughout the valley, in some cases due to the prestige they offer,” the report states.

The report points out that capitalization rates in Kelowna are much higher than in Vancouver, so foreign and domestic investors alike are flocking to the city.

A capitalization rate is a measure of how much money a property generates compared to what it cost to buy: the higher the cap rate, the more attractive the purchase, and Kelowna’s are drawing investors out of the mainland and into the Okanagan.

The report says that record-breaking property values throughout the lower mainland, driven up partly by foreign investment, has lead many Vancouverites to sell their properties and buy something comparable in Kelowna for “a fraction of the price.

“It has been very common this year to hear stories about people selling their home in Vancouver for $4 million, and then buying a new home and a ski condo here in Kelowna/Big White for less than half of that amount,” the report reads.

With further evidence of the trend, Cambridge House recently announced a new volume sales record for the Okanagan, with 172 of the 192 suites sold at opening with 25% being sold to Asian investors.

As of August 2016, the average home in Kelowna cost $582,400. In Vancouver, it’s $1,561,000.

“Kelowna is developing commercial and cultural infrastructure that anticipates a very bright future, and with media now beating the drum, foreign investors— especially from Asia—have taken notice,” the report concludes.