Mission Group CEO thinks condo construction market could heat up in spring – Kelowna News

Some good news may be on the horizon in terms of new home construction.

As the cost of borrowing starts to come down, several apartment projects that have been on hold for the past 12 to 18 months in Kelowna could start to come to life.

According to Mission Group CEO Jon Friesen, it could happen within the next six months.

The reason for optimism comes after the Bank of Canada cut its interest rate by half a point on Thursday to 3.75%.

Some experts believe the rate could fall as much as 2 percent by next summer.

“When interest rates go down, that’s a very good thing because it lowers the cost of ownership,” Friesen told Castanet News.

“Most people are interested in how much it costs to live each month. You can rent money or rent the house and when you can rent money for less then you will buy.

“When interest rates go down, then the monthly cost of ownership goes down.”

And the cost of building these new homes is also falling.

“When costs come down, developers are more likely to launch a project,” Friesen said.

While Kelowna’s rental construction market is healthy with several new projects underway or under construction, the condo market has stagnated.

Mission Group has discontinued two downtown high-rise projects, including a planned 34-story tower at the corner of Water Street and Lawrence Avenue.

Kerkhoff Construction stopped One Varsity across from the downtown UBCO tower and the Central Mobile Home redevelopment, while Stober Group paused for a large development across from Original Joe’s on Pandosy Street.

As this market waits for more favorable conditions, Friesen says the demand for housing in the city is only increasing.

However, interest rates, he says, are only an impediment to the market.

“There are other hurdles, like short-term rental regulations,” he says. “There are other things like additional property transfer tax for foreign nationals and specification tax.

“All those policies outside of interest rates have the effect of driving investors away.”

Friesen says a large number of people in BC are investing in real estate instead of the stock market, and much of that is going into the rental market.

“We know that when an investor buys an apartment, they will definitely add it to their rental stock.

“But those investors are now pulling out of the market and because of that, companies like us are seeing the investor market disappear and so we’re delaying projects.”

He hopes these investors will be ready to return to the market very soon.

“No one has a crystal ball, but we see pent-up demand continuing to grow,” says Friesen.

“We are not seeing supply growth anywhere near the pace of demand. We think there is a window of opportunity for buyers, perhaps six months or less before things unravel.

“Once everyone steps into it, it will be a different market. And we believe that change will happen over many months, not years.”