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Prices for B.C. vacation homes dip despite steady demand

Rapid price increases are giving way to price reductions amid a growing inventory of recreational properties across the province
Recreational property
B.C. vacation market sees rising inventory and lower prices this summer. | Frank O’Brien, Western Investor

The outlook for B.C. recreational property remains solid, with brokers saying some of the strongest markets in B.C. are now providing a haven against the turmoil roiling residential markets at large.

According to Re/Max Canada, high prices for B.C. recreational properties were set to rise even further when it surveyed national markets earlier this year. Tofino, Ucluelet and the South Okanagan were among the strongest, with prices forecast to rise 5 per cent.

But a succession of rate hikes by the Bank of Canada has cooled the market, slowing home sales and prices while boosting inventories.

Recreational properties in many areas remain in demand, however, with rapid price increases giving way to modest price declines as inventories have yet to loosen.

“We think there will be some adjustment in price, but it won’t be very big, maybe 5 per cent, because of the lack of inventory,” said Judy Gray, who co-owns and co-manages Re/Max offices in Port Alberni, Tofino and Ucluelet. “We don’t think they’ll go below 2021 prices. It will take a very big recession; more interest rate increases and more fear [for that].”

Tofino house prices averaged $1.7 million in the first quarter of this year, up 51 per cent from a year ago. In Ucluelet, prices averaged just over $1 million, up 42 per cent from a year earlier.

It’s a similar story in other key markets that have seen an influx in buyers in recent years. Brokers in the Okanagan expected prices to remain relatively stable thanks to limited supply and the desirable nature of the region, which remains one of the fastest growing in Canada.

“Whenever we have these downturns in the economy, we typically – the last few – have not suffered as bad as most other areas, just because of the desirable nature of where we are,” said Jerry Redman, owner and managing director of Re/Max Kelowna. “Supply is probably our biggest problem, and that’s why the prices went up as much as they did because we couldn’t put anything on the market.”

That isn’t changing, especially as construction prices rise and starts slow as developers assess the market.

“I think we’re going to see our recreational stuff slow and stabilize … more than we’re going to see a drop in prices,” Redman said.

A key factor is that the kind of buyer seeking recreational property typically has discretionary income and is less vulnerable to cost-of-living pressures and interest rates.

“There’s not many guys out buying a $4 million house that really care about the interest rates,” Redman quipped.

Many buyers also bring significant equity from larger centres where property values are higher.

Tofino and Ucluelet have seen a notable influx of buyers over the past three years from Squamish, Gray said. Squamish property values rose as people left Metro Vancouver. Now, owners are cashing out and moving to Vancouver Island where a similar outdoor lifestyle and entrepreneurial ethic prevails.

“We call it the ‘Squamish invasion,’” she said. “A lot of those people that are coming from the bigger centres raise their families, then you’re finding that the grandparents are following.”

While activity has slowed in recent months, Gray said this isn’t uncommon in summer.

“The demand for housing is still very high, and there’s a lot of buyers on the sidelines,” she said.

She doesn’t expect people scouting properties now to close on deals until they see what the fall brings. She doesn’t expect demand to ebb, but she doesn’t expect prices to roar back, either.

“I don’t see us rising again for a bit [but] I don’t think we’re going to lose a lot of what we’ve gained,” she said.

One exception may be the South Okanagan, which enjoyed strong growth during the pandemic but was forecast in this spring’s report from Re/Max to see a 20 per cent decline in recreational property sales. The driver was initially a lack of inventory but now it’s a lack of buyers despite a relatively affordable average sale price of less than $650,000.

Karrie Grewal of Crush Real Estate in Penticton said Spirit Ridge in Osoyoos had 25 listings in early August. A year ago, there were none. Waterfront properties that come onto the market are no longer seeing multiple offers, a contrast to the heady days of the pandemic when Grewal sold more than any time previously.

“We’re seeing more price reductions than we’ve ever seen,” she said.

The first week of August saw 93 price reductions, for example. Grewal handled a listing where the price dropped from an optimistic $2.1 million in June to $1.7 million in August.

“It was probably a little ambitious,” she said. “But now they’re just chasing the market down.”

Three-year-old restrictions on short-term rentals in Oliver and Osoyoos have been joined by similar bylaws in Kelowna last summer and in Summerland this spring.

“We had three people looking for vacation properties in Summerland up until that bylaw came down,” Grewal said. “It changes everything, and then we end up with more inventory on the market and now we’re looking for the full-time resident instead of the vacation buyer.”