Canada’s Riskiest Property Markets: Vancouver and Kelowna on Edge
Property Market Risk Assessment - Major Canadian Cities
In Canada’s property market, Vancouver and Kelowna emerge as the riskiest cities for potential corrections, underscoring the importance of assessing local market dynamics in any investment decision.
Properti Edge’s latest analysis identifies four critical risk drivers—market balance, price volatility, overvaluation, and new supply—that paint a precarious picture for these two British Columbia hotspots.
The Tale of Two Cities: Vancouver and Kelowna
Vancouver
Vancouver’s market, currently classified as balanced, exhibits significant warning signs.
Prices have dropped sharply over the past three months, reflecting heightened volatility.
Detached home values now stand at 22 times the median local income—a striking overvaluation that places homeownership out of reach for the majority.
Compounding these issues is a robust pipeline of new housing supply, with 10% more units under construction compared to 2023.
These conditions create fertile ground for a correction, where even minor shocks to supply or demand could trigger steep price adjustments.
Kelowna & Okanagan
Kelowna, meanwhile, sits in a buyer’s market—a more evident signal of imbalance.
Recent months have seen dramatic price declines, reflecting volatility similar to Vancouver’s.
Detached homes are priced at nine times the median income, a high ratio, though less extreme than in Vancouver.
However, Kelowna’s housing pipeline is even more concerning, with 40% more units under construction than a year ago.
Such a surge in supply raises the risk of oversaturation, increasing the likelihood of a correction.
The Anatomy of Risk
Properti Edge’s overall risk assessments hinge on four interconnected factors:
Market Balance: Extremes in market dynamics—whether tilted heavily toward buyers or sellers—indicate susceptibility to sudden shifts in supply or demand. A balanced market like Vancouver’s might seem stable on the surface, but sharp fluctuations in price indicate latent vulnerabilities.
Price Volatility: High volatility destabilizes markets, often prompting fear-driven behaviors. Buyers delay purchases amid uncertainty, while sellers rush to lock in gains, amplifying the cycle. Both Vancouver and Kelowna have exhibited this volatility, with dramatic price swings spooking participants.
Overvaluation: A “thin market” where transaction volumes have dropped significantly because property prices far exceed what most buyers can afford, is particularly precarious. In a high transaction volume market, a few outlier purchases on the high or low side would be lost in the data. In a thin market, a cluster of outliers can strongly influence market values, leading to wild swings. Vancouver exemplifies this dynamic, where sky-high valuations deviate significantly from local incomes.
New Supply: Rapid changes in the flow of new housing stock intensify risk. The market has an “absorption rate” based on population growth, employment growth, and a given home price. The buyers in the market “absorb” (i.e., buy) a certain number of units per year. While new construction addresses long-term supply shortages, a flood of completions in one year can bring more units to the market than buyers can absorb at current prices. Developers then accept lower prices (or offer other incentives) to help unload unabsorbed inventory. Both Vancouver and Kelowna face record levels of housing under construction, with Kelowna’s 40% surge amplifying this risk.
Navigating Uncertainty
For buyers and sellers, these findings serve to encourage caution.
Those with short investment horizons—such as property flippers or those planning to sell within five years—should consider the heightened risk of a correction.
Similarly, homeowners nearing retirement who are banking on home equity to fund their retirement may wish to downsize sooner to safeguard their financial future.
It is essential to note that a high-risk designation does not guarantee a market correction. Instead, it highlights a greater probability of disruption relative to other markets. Savvy market participants should weigh these risks alongside their personal circumstances and investment objectives.
As Canada grapples with the complex interplay of housing affordability, supply dynamics, and economic fundamentals, Properti Edge remains committed to equipping buyers, sellers, and investors with the data-driven insights needed to navigate the evolving property landscape.
