The Effect of Geoarbitrage on Kelowna’s Real Estate Market

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In Kelowna, we’re being exploited. You read that right. How is this happening? Well, there is this little concept called geoarbitrage, popularized by Tim Ferris, that explains how you can leverage the disparity between two different markets in order to create a financial gain.

Obviously, this is what China and other countries have been doing to the Vancouver real estate market for the last 20 years - driving property values up to the point where four walls and a roof sell for $1.2 million in places like Richmond and White Rock.

What does this mean for us? There are a massive number of people living in the lower mainland who’ve owned real estate for multiple decades who bought their properties for maybe $150,000 or $200,000 and have seen those same properties increase in worth to anywhere from $1.2 to $1.5 million due to the pressure on their real estate market and international demand.

Now these same people who’ve always been interested in Kelowna are getting on the MLS and seeing palatial homes for $600,000 or $700,000 sitting on vineyards, or golf courses, or overlooking a beautiful lake. Of course they’re going to cash in their chips and come here. They won’t just buy a house, they’ll also buy an investment property to fund their retirement. It makes sense - you would do it too.

Now, think about the massive size of the population of Vancouver. If one out of every 1,000 people in the lower mainland gets the memo that their house is worth a ton of money and there’s a disparity between the market there and the market in Kelowna, and they can not only upgrade their house and lifestyle but also put a half million dollars in the bank, you know they’ll be coming.

So what are we going to do? Are we going to get upset that they’re driving our prices up? No! This is the world as it is, not how we want it to be. Getting on the right side of this equation means arming yourself with a bunch of real estate. If you want to benefit from a boom, you have to own the stuff. So what I’m saying is buy cash flow property. The market is wonderful for that. Then when the market goes crazy and prices go up, you can sell your own Kelowna real estate and perform your own geoarbitrage on any market you like. Whatever you want to do, you can take advantage and leverage the disparity between the markets here and wherever it is you’d like to go.

To reiterate, we are being exploited, but that’s a good thing. If you have any questions about what your home might be worth or want to see a list of properties that might provide cash flow, by all means call me or shoot me an email.

What Pricing Your Home Correctly Can Save You

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I just came out of a really cool meeting with the team and we were throwing different ideas around about pricing a home aggressively to sell quickly and for the most amount of money in this market.

A really neat stat that we figured out that I want to share with you is that homes being sold inside the first 30 days of being listed (which is becoming more common) are garnering over 99% of their asking price. When it comes to negotiation, sellers are in the driver’s seat. It’s a seller’s market, and a home selling in the first 30 days - if it’s new and fresh - is going to sell for full price, and maybe more.

How does that contrast to a home on the opposite end of the spectrum? What we’ve found is that homes either sell in the first 30 days or after 90 days. The reason for this is that it typically takes the seller 90 days to agree to a price reduction. I’ve looked at all the sales that have happened in the last couple months for homes that lasted 90+ days on market and found that these negotiations had a much different story to tell. Namely, people whose homes sat on the market for that period or longer got only 95.9% of their list price. That’s not 95.9% of the price they started at, but rather the reduced price that they got.

The reason for this difference is the negotiation position the seller had when they started. Even though they reduced the price, they’re still an old listing. This gives the buyer an element of control. Isn’t that interesting? Price the home properly, and you net an additional 3%. With average home prices now close to $600,000, just that difference in coming out strong versus have a pie-in-the-sky number can save you $20,000 in the negotiations

I hope you guys found this tip helpful. If you have any more questions, just call me or shoot me an email.

How we helped Stacie and Darren Read by providing a fast, speedy service.

"I am in the process of buying one and I just sold one.  They provide a fast, speedy service.  I had a quick sale on my home, it was only on the market for six days.  Excellent people to work with!  They are very kind and willing to what they have to do to get it done."
      Stacie Read, Home Seller and Buyer