The Rules Have Changed: Why Kelowna’s Real Estate Market Is About More Than Just Interest Rates
Everyone Knows the Market Has Slowed — But It’s About More Than Just Interest Rates
Most people point to high home prices and rising interest rates as the main reason the Kelowna real estate market has cooled. And yes — that’s played a major role.
Between 2022 and 2024, the Bank of Canada’s overnight rate surged from 0.25% to 5%, one of the fastest climbs in Canadian history. That sudden rise made borrowing more expensive and instantly reduced how much buyers could afford.
Now, rates have come down about 2.5% from their peak, and based on the latest BCREA statistics from September 2025, there’s early evidence that the market may be turning a corner. The average MLS® residential price in British Columbia rose 0.4% year-over-year — up to $948,296 from $944,298 in September 2024.
That’s a small but important shift — and it hints that the worst of the downturn may be behind us.
But if you look a little closer, the slowdown in Kelowna’s housing market runs deeper than interest rates. It’s also about new provincial taxes, fresh housing legislation, and shaken consumer confidence across B.C.
Let’s break down what’s really changed — and what these shifts mean for buyers, sellers, and investors navigating the Okanagan housing market today.
1. Interest Rates — The Spark That Started It All
There’s no denying it: interest rates lit the first fire.
As borrowing costs surged, buyers instantly lost 30–40% of their purchasing power, and monthly mortgage payments nearly doubled on the average Kelowna home.
Families hit pause. Sellers adjusted expectations. And momentum slowed.
Now, with rates 2.5% lower than their peak and forecasts suggesting more cuts through 2026, we’re seeing early signs of renewed confidence — especially from those who’ve been waiting for the right moment to make a move.
Still, higher rates were only the first domino. The next policy changes reshaped the entire landscape.
2. Bill 44 — BC’s Push for Gentle Density
In 2024, British Columbia introduced Bill 44, the Small-Scale Multi-Unit Housing Law, requiring cities like Kelowna to allow 3–6 homes on most single-family lots.
Goal: Increase housing supply and improve affordability.
Reality: Uneven rollout and uncertainty.
Many of the first infill projects in Kelowna are higher-end developments rather than true entry-level options. While the law will expand supply over time, short-term confusion has left homeowners and builders trying to interpret new zoning rules.
Still, Bill 44 marks a major turning point — redefining what Kelowna’s neighborhoods will look like in the years to come.
3. Short-Term Rental Restrictions — The Investor Shake-Up
If you’ve ever rented out a Kelowna condo on Airbnb or VRBO, this one hits close to home.
Under the Short-Term Rental Accommodations Act, property owners can now only rent:
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Their principal residence, plus
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One additional suite, if properly registered and licensed with the province.
By June 2025, platforms like Airbnb must remove all unlicensed listings.
This change effectively ended short-term rental opportunities for hundreds of downtown Kelowna condos, pushing some investors to sell and others to pivot toward long-term rentals or duplex/townhome investments.
It’s one of the biggest market shifts Kelowna has seen in years.
4. The BC Home Flipping Tax — Slowing the Quick Turnaround
Starting January 1, 2025, BC’s new Home Flipping Tax adds up to 20% on profits from properties sold within one year of purchase, tapering to 0% by year two.
Even presales and assignment sales are affected.
While it’s aimed at speculators, regular homeowners who need to sell early — due to job changes or family circumstances — are also hesitating. The result? Less inventory and fewer quick-turnover listings in the Kelowna market.
5. Developers Press Pause
Even though Kelowna real estate demand remains strong, developers face new headwinds:
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Higher borrowing costs
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Rising construction prices
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Zoning changes
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Slower municipal approvals
Many have shifted toward purpose-built rental developments, supported by the federal GST rebate and provincial property transfer tax exemption for long-term rental projects.
It’s good news for renters, but it reduces the number of ownership options for buyers — at least for now.
6. New Taxes, More Compliance, and Growing Confusion
Kelowna homeowners now juggle more layers of compliance than ever:
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Underused Housing Tax (UHT)
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Federal and provincial flipping taxes
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Higher capital gains inclusion rates
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Potential vacant home taxes being explored locally
While these rules aim to cool speculation, they’ve also created confusion and hesitation.
When homeowners don’t fully understand the rules, they wait — and that uncertainty slows the market even further.
7. The Investor Squeeze
Small landlords are under increasing pressure.
Annual rent increase limits have stayed below inflation:
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2023: 2.0%
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2024: 3.5%
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2025: 3.0%
Meanwhile, insurance, property taxes, and maintenance costs continue to rise.
The result? Many landlords are selling — removing much-needed rental units from Kelowna’s housing stock and tightening the market for tenants.
8. Kelowna’s Population Keeps Growing
Despite all the headwinds, Kelowna’s population continues to grow.
BC Stats reports the Kelowna Census Metropolitan Area reached about 247,000 people in 2023, up 2.9% year over year — one of the fastest-growing regions in BC.
The City of Kelowna itself grew by 3.2%, driven by interprovincial migration and new residents from Alberta and Ontario.
This steady growth ensures that long-term housing demand — both ownership and rental — remains strong.
9. The Confidence Gap
This one doesn’t show up in statistics — but it’s real.
When buyers don’t understand the rules, they wait.
When sellers aren’t sure what’s next, they hold off.
When developers face uncertainty, they pause projects.
It’s not fear — it’s confusion.
And confusion slows everything down.
The Kelowna real estate market isn’t broken — it’s adjusting. Until confidence improves, we’ll continue to see a more cautious, thoughtful pace of buying and selling.
10. The Market Is Changing, But Opportunity Remains
After years of constant change, Kelowna’s housing market is beginning to rebalance.
✅ Interest rates are easing — down 2.5% from the peak.
✅ New zoning laws are opening doors to creative infill housing.
✅ Rental supply is increasing.
✅ Buyers are finding value again compared to 2021 prices.
It’s no longer a market for speculation — it’s a market for strategy, patience, and smart preparation.
The rules have changed, but opportunity remains for those who understand the new landscape.
Final Thoughts
The past few years have tested everyone — from first-time buyers to seasoned developers.
But Kelowna’s real estate market is resilient.
We’ve weathered interest-rate shocks, regulatory changes, and investor pullbacks, and the city continues to adapt and thrive.
Now more than ever, success in real estate comes from clarity and education.
Those who take the time to learn, plan, and act with intention will be the ones who move confidently — no matter what the market looks like.
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Frequently Asked Questions About the Kelowna Real Estate Market
1. Are interest rates still high in Canada in 2025?
Interest rates have fallen by about 2.5% from their peak, and many economists expect additional rate cuts through 2026. This creates new opportunities for buyers to re-enter the market with improved affordability.
2. What is Bill 44, and how does it affect Kelowna homeowners?
Bill 44 allows 3–6 homes on most single-family lots in cities like Kelowna. It’s designed to boost supply and improve affordability, though it’s created short-term confusion as cities adjust zoning bylaws.
3. Can I still run an Airbnb in Kelowna?
Only if the property is your primary residence and you’ve registered and licensed it under BC’s Short-Term Rental Accommodations Act. Unlicensed rentals will be removed from platforms like Airbnb by June 2025.
4. How does the BC Home Flipping Tax work?
Anyone selling within two years of purchase may owe a flipping tax of up to 20% of profits (declining to 0% by year two). This applies to resale, presale, and assignment properties.
5. Is Kelowna still a good place to invest in real estate?
Yes — despite new regulations, Kelowna’s population growth, strong rental demand, and lifestyle appeal continue to drive long-term opportunity. Strategic investors focusing on long-term rentals or infill development are well positioned.
Mark & Maddie | Selling Kelowna Real Estate Group | eXp Realty Kelowna
📞 778-744-0872 | ✉️ [email protected]
Serving Kelowna, West Kelowna, Lake Country, and Peachland — your trusted partners in Okanagan real estate.
