Thursday, October 15, 2009

Home Construction in Kelowna – what it takes today!

The biggest financial market crash since the 1930’s has been followed by the deepest economic slump since that time. And yet, if we are to believe some of the recent economic reports put out by major Canadian banks and investment firms, there is an unprecedented amount of money sitting on the sidelines, which for the most part is earning little to no returns.

Between the years of 2003 and 2008 Kelowna residents witnessed a period of unprecedented construction activity and real estate sales. Single family construction was ignited by the fires of 2003 (no pun intended), followed by what many saw as condo-mania. Many bought homes and in particular, condos, that they never intended on occupying. The lure of a quick flip and easy money were in full swing! Rising prices and low interest rates forced many buyers to make quick decisions in a very heated market. Most housing prices more than doubled over this period of time. Many of the local old-timers just shook their heads in disbelief.

This activity all but came to a halt in mid to late 2008. As inventory accumulated, trades went elsewhere for jobs, and the ripple effect of a slumped local construction industry created massive lay-offs across the board, when coupled with a gloomy macro economic picture.

Yet, there is hope! Fundamentally, people need homes to live in and Kelowna is still one of the most desirable places to live in Canada. What appears to be selling in today’s climate are homes under say $500K. There’s an issue of affordability and comfort for this buying demographic. Land prices, labor rates, and in many cases, material costs are down. Combine this with the unprecedented money that is sitting on the sidelines, and there’s only one factor missing, and that’s providing consumers with a reason to feel comfortable about buying, which boils down to confidence and perceived value.

There are enough interior and exterior finishing options that builders can use today to ensure their costs are reduced without compromising on appearance and quality significantly. The key to a healthy local residential construction and housing market is the supply of smaller, lower cost, energy-efficient homes to meet the needs of first time home buyers, young families, empty nesters, and the downsizing baby boomers. When builders focus their efforts on meeting the needs of these groups we will all witness some of those unprecedented savings being pulled from low interest yielding financial instruments and find their way back into the housing market.

Richard Tremblay has spent the past 25 years working in various aspects of the construction of building products industries.

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